2019 (6) TMI 824 - AT - Central Excise

Successful appeal in Central Excise duty case due to lack of corroborative evidence

M/s Industrial Foundry, Manojbhai S. Patel Versus C.C.E. Ahmedabad-II

The appeal against the demand of Central Excise duty and penalty, involving allegations of clandestine clearance through trading firms, was successful. ... Clandestine removal - reliability of statements - only evidence against the appellant is statement wherein, the charge of clandestine clearance through the trading firms has been admitted - retraction of statements - HELD THAT:- The said statement has not been retracted. Revenue has not investigated further taking shelter of the letter dated 26.12.2006 wherein, the appellant after paying part liability, requested not to enquire further. The said letter has not been produced by the either party before us so the exact content of the letter is not available. The letter is also not a relied upon document as can be seen from the show cause notice. There are plethora of decisions wherein it has been held that charge of clandestine clearance cannot be sustained merely on the basis of statement and there has to be some corroborative evidence to substantiate the said charge. Tribunal in the case of Shreeji Aluminum Pvt. Ltd. [ 2012 (10) TMI 418 - CESTAT, AHMEDABAD ], wherein under similar circumstances, it has been held that corroborative evidence is necessary to establish charge of clandestine clearance. Appeal allowed - decided in favor of appellant. Issues:Appeal against demand of Central Excise duty and penalty - Charge of clandestine clearance through trading firms - Admissibility of statement as evidence - Necessity of corroborative evidence - Effect of letter requesting not to extend inquiry.Analysis:The appeal was filed against the demand of Central Excise duty and penalty, with an additional appeal by the Authorized Signatory of the appellant against the penalty imposed. The appellant, engaged in the manufacture of C.I. Castings, was alleged to have sold goods through trading firms owned by close family members to avoid payment of duty. The main evidence against the appellant was a statement by the Authorized Signatory admitting to this practice. The appellant argued that the statement was given under duress and without corroborative evidence, the charge of clandestine clearance could not be sustained. The Revenue, however, relied on the statement and a letter dated 26.12.2006 from the appellant requesting not to extend the inquiry further.The Tribunal analyzed the evidence and held that the charge of clandestine clearance could not be sustained solely based on the statement without corroborative evidence. The letter dated 26.12.2006, which the Revenue used to avoid further inquiry, was not produced as evidence and was not relied upon in the show cause notice. The Tribunal emphasized the necessity of corroborative evidence to establish such charges, citing the case of Shreeji Aluminum Pvt. Ltd. where a similar requirement was upheld. The Revenue had ample time to investigate and substantiate the charge but failed to do so, leading to the conclusion that the charge of clandestine clearance could not be upheld due to lack of evidence. Consequently, the appeals were allowed, and the decision was pronounced in open court on 14.11.2018.