2018 (6) TMI 308 - AT - Central Excise

Tribunal overturns penalties due to lack of evidence and reliance on third-party records.

Sushant Kamalkunar Saha, Proprietor, M/s. Durga Trading Company, Udai Chand Chaurasia, Proprietor, Rajesh Kumar Suri, Partner. Ashish Srivastava, Authorised Signatory, Alim Ali, Authorised Signatory, Hari Mohan Tripathi, Accountant, Naval Kishore Pandey, Accountant, C.C.E. & S.T., Lucknow, Rajendra Daji Jadhav, Prop., Rakesh Chadha, Jitendra Gandhi Versus CCE, Lucknow, Durga Trading Company

The Tribunal concluded that the allegations of clandestine removal of goods were not substantiated by concrete evidence. The reliance on third-party ... Clandestine removal - Pukar gutkha - during the period involved in the present show cause notice DTC paid central excise duty of ₹ 5,24,99513/- and demand of central excise duty in the present proceedings is ₹ 4,90,19731/- case of appellant is that both the goods are same - scope of SCN - Held that:- Once the goods are cleared on payment of duty at the factory gate they have no control over the goods and purchaser of goods is free to deal with them in any manner he likes. Throughout the entire proceedings of the present case revenue has nowhere established that the goods on which duty of ₹ 5,24,99513/- was paid on Pukar brand gutkha for the period from May 2006 to December 2006 were different than the goods on which duty of ₹ 4,90,19731/- was confirmed in the present proceedings - In the absence of any such investigation it cannot be conclusively proved that the goods on which central excise duty of ₹ 4,90,19,731 was demanded were not the goods on which duty of ₹ 5,24,99513/- was paid during the period from May 2006 to December 2007. Appeal allowed - decided in favor of appellant. Issues Involved:1. Allegation of clandestine removal of goods.2. Validity of evidence based on third-party records.3. Appropriateness of penalties imposed on various parties.4. Confirmation of duty demand and interest.5. Investigation adequacy regarding duty-paid goods versus duty-demanded goods.Issue-wise Detailed Analysis:1. Allegation of Clandestine Removal of Goods:The case revolves around the alleged clandestine removal of 145,632,000 pouches of Pukar brand gutkha by M/s. Durga Trading Co. (DTC) without payment of central excise duty, amounting to Rs. 4,90,19,731/-. The show cause notice alleged that DTC mis-declared the goods as other items to evade duty. DTC denied the allegations, stating that all sales were made at the factory gate and duty was paid appropriately. They argued that no incriminating evidence was found during the search of their premises and that the show cause notice was based on assumptions without positive evidence.2. Validity of Evidence Based on Third-Party Records:The evidence against DTC was largely based on documents and statements obtained from third parties, such as Laxmi Agencies and other entities in Mumbai. DTC contended that the show cause notice relied on third-party records and that no direct evidence linked them to the alleged clandestine activities. They cited several case laws to argue that third-party evidence alone is insufficient to sustain such allegations. The Tribunal found merit in this argument, noting that the revenue did not establish a direct link between DTC and the alleged clandestine removal.3. Appropriateness of Penalties Imposed on Various Parties:The original order imposed significant penalties on DTC and various individuals associated with the case, including Rs. 4,90,19,731/- on DTC and similar amounts on other co-noticees. DTC and the co-noticees challenged these penalties, arguing that the allegations were not substantiated by concrete evidence. The Tribunal agreed with the appellants, noting that the penalties were based on unproven allegations and assumptions.4. Confirmation of Duty Demand and Interest:The original authority confirmed the demand of Rs. 4,90,19,731/- and ordered the appropriation of Rs. 1,25,00,000/- paid during the investigation. Additionally, interest was demanded under Section 11AB of the Central Excise Act. DTC argued that they had already paid central excise duty amounting to Rs. 5,24,99,513/- for the period in question and that the demand was based on incorrect assumptions. The Tribunal found that the revenue did not investigate whether the goods on which duty was already paid were different from those on which the demand was raised. Therefore, the demand could not be conclusively proved.5. Investigation Adequacy Regarding Duty-Paid Goods Versus Duty-Demanded Goods:The Tribunal emphasized that the revenue failed to investigate and establish that the goods on which duty of Rs. 5,24,99,513/- was paid were different from those on which the demand of Rs. 4,90,19,731/- was raised. Without such an investigation, the allegations in the show cause notice could not be sustained. The Tribunal set aside the impugned order and allowed the appeals filed by DTC and the co-noticees, while dismissing the appeal filed by the revenue.Conclusion:The Tribunal concluded that the allegations of clandestine removal were not substantiated by concrete evidence, particularly as the revenue did not establish a direct link between DTC and the alleged activities. The reliance on third-party records and assumptions was insufficient to sustain the demand and penalties. Consequently, the Tribunal set aside the impugned order, allowed the appeals of DTC and co-noticees, and dismissed the revenue's appeal.