2018 (5) TMI 1660 - AT - Central Excise

Tribunal overturns duty demands & penalties due to lack of evidence in clandestine removal case

The Tribunal set aside the orders confirming duty demands and penalties against the appellant in a case involving allegations of clandestine removal of ... Clandestine removal - removal of sponge iron without the cover of Central Excise invoices - allegations based on inquiries made in the third party’s documents - Held that:- The Tribunal in the case of CCE & ST, Raipur Vs. P.D. Industries Pvt. Ltd. [2015 (11) TMI 455 - CESTAT NEW DELHI] held that the allegations based on inquiries made in the third party’s documents of Commission Agent and transporters cannot lead to the fact of clandestine activities. In the present case, the entire endeavor of the Revenue is based upon the documents recovered from the premises of M/s. Pankaj Ispat Ltd. read with the statement of their Director and by ignoring the statement of the Director of the present appellant - the impugned orders confirming the demands and imposing penalties are unsustainable - appeal allowed - decided in favor of appellant. Issues:Allegations of clandestine removal based on third party records, confirmation of demand of duty, imposition of penalty, sufficiency of evidence, reliance on recovered documents and statements.Analysis:The case involved allegations of clandestine removal of raw materials by the appellant without payment of duty, based on records recovered from a third party. The Revenue claimed that the appellant received sponge iron without proper documentation, which was then used to manufacture ingots cleared without duty payment. The original adjudicating authority and the Commissioner (Appeals) upheld the demand of duty and penalty. However, the Tribunal referred to previous judgments where similar demands were set aside due to lack of corroborative evidence. The Tribunal emphasized that allegations of clandestine removal cannot be sustained solely on third party records without further investigation or verification regarding the actual manufacturing process and transportation of goods. The Tribunal highlighted the insufficiency of relying on recovered private records without additional evidence to prove clandestine activities.The Tribunal noted that the Revenue's case primarily relied on documents from a different entity and the statement of their director, while disregarding the statement of the present appellant's director. In light of the lack of conclusive evidence linking the appellant to clandestine activities, the Tribunal deemed the orders confirming the demands and penalties as unsustainable. Consequently, the Tribunal set aside the orders and allowed both appeals, providing consequential relief to the appellants. The judgment underscores the importance of substantial evidence and proper investigation to establish allegations of clandestine removal, emphasizing the need for corroborative proof beyond third party records to uphold such charges.