2019 (1) TMI 1229 - AT - Central Excise

Tribunal overturns penalty for lack of evidence, emphasizes need for tangible proof in clandestine cases

M/s Kamdhenu Pipes, Jigneshbhai Chhaganbhai Bhimani, Kishorebhai Mavjibhai Medpara, Dipeshbhai Pravinbhai Nanavati Versus C.C.E. & S.T., - Rajkot

The tribunal ruled in favor of the appellants, setting aside the demand for clandestine clearances due to lack of crucial details in diaries and disputed ... Clandestine removal - Pipes - demand is based upon the diaries and estimate titled loose papers seized from the factory premises of the Appellant - demand also based on statements of partner and buyers - section 9D of CEA - Held that:- The clearances accepted by the said two buyers were not coming out from their own records or documents and mere statements have been recorded. The clearance value sheet appended to their statement only has amount and date details without name of goods or date/ quantity of clearance of goods. It is not forthcoming from any record as to what such amounts represent or what were the goods and their quantity and when the same were cleared. It is coupled with the fact that both the alleged consignees have refused their statements. Shri Kishorebhai has retracted his statement and Alpeshbhai’s statement and letter stands disputed. There is no independent evidence of manufacture and clearance of goods from the factory of Appellant. Merely on the basis of entries is diaries/ loose sheets which do not have name and quantity of goods apart from the fact that the buyers whose statements were relied upon has negated their statement, the demand does not sustain. Even the statement of the alleged buyers Shri Kishorebhai Mavjibhai Medpara Proprietor of Ms/ Shreenathji Pipe, Shri Dipeshbhai Pravinbhai Nanavati, authorized signatory of M/s Nanavati & Co are not corroborated by any independent corroborative evidence. None of their records, showing the receipt of goods alleged to have been cleared clandestinely, has been relied upon. Moreover it is a third party statement which cannot be relied upon in absence of corroboration - merely on the basis of recovery of exercise note books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence, the demand cannot be made. In absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. Unless there is clinching evidence on the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of diary or loose sheets. Demand set aside - appeal allowed - decided in favor of appellant. Issues:Appeal against Order-in-appeal upholding adjudication order for clandestine clearances without payment of duty and penalties.Analysis:1. Facts of the Case: M/s Kamdhenu, engaged in manufacturing PVC Rigid Pipes, faced allegations of clandestine clearances based on seized diaries and statements of involved parties.2. Appellants' Arguments: Appellants contended that statements obtained under coercion were not sustainable, lacking independent corroborative evidence. They emphasized non-compliance with Section 9D provisions and absence of details in statements.3. Legal Counsel's Defense: Legal counsel highlighted that statements were in English, signed without understanding by parties not fluent in English. They argued that goods were received on invoices, denying clandestine clearances.4. Judicial Review: The tribunal examined the evidence, noting retractions and disputes in statements. Lack of independent evidence, absence of goods details in diaries, and disputed statements weakened the demand's validity.5. Corroborative Evidence: The tribunal emphasized the necessity of tangible evidence for establishing clandestine activities, citing past judgments requiring proof of unrecorded purchases, sale transactions, and raw material usage.6. Legal Precedents: Referring to legal precedents, the tribunal emphasized the need for fundamental criteria to establish clandestine activities, including tangible evidence beyond mere inferences or assumptions.7. Decision and Ruling: The tribunal found the demand unsustainable due to lack of crucial details in diaries and disputed statements. Consequently, the penalty imposed on the appellants was also set aside, allowing all appeals with consequential reliefs.This detailed analysis of the judgment showcases the legal intricacies involved in the case of alleged clandestine clearances and the tribunal's decision based on the evidence presented and legal precedents cited.