2022 (1) TMI 1173 - AT - Central Excise

Tribunal rules in favor of appellant Director in duty demand case, emphasizing need for concrete proof.

Shri Rakesh Kumar Jain, Director of M/s Rajasthan Industrial Gases Ltd. Versus Commissioner, Central Goods and Service Tax Commissionerate, Jaipur

The Tribunal ruled in favor of the appellant, the Director of a manufacturing company, in a case concerning duty demand confirmation. The decision ... Clandestine removal - bars/ rods - demand on the basis of the loose documents recovered from the premises - corroborative evidences or not - Burden to prove - invocation of extended period of limitation - HELD THAT:- It is observed that the premises of SSSRM were search on 10.09.2005. The documents recovered from the premises, based whereupon the show cause notice was issued, admittedly are in the form of loose parchies and in the form of hand written ledger book that too those which got recovered from the premises of SSSRM. There appears neither corroborative evidence to support those loose & handwritten documents nor any evidence to connect them to the alleged guilt of the appellant or to the alleged guilt of M/s. RIGL where the appellant is director. The statement of appellant, Smt. Sunita Devi, was recovered in June, 2005. There appears no acknowledgement on her part about she being involved in the alleged collusion with SSSRM for the alleged clandestine removal except for the raw material to have been delivered to SSSRM - the entire burden was that of the Department to prove that the appellant have been clearing the raw material from their premises and were getting the same delivered to M/s.SSSRM without discharging their liability. It becomes clear that there is no admission by the appellant for the alleged clandestine removal. Hence, the onus was upon the Department to produce the positive evidence from the appellant’s record and premises. But, it is simultaneously clear that no other evidence from the transporter or raw-material provider or the purchaser has been collected by the Department - The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Invocation of extended period of limitation - HELD THAT:- It is held that apparently and admittedly appellant was regularly filing the returns. Hence, the facts were regularly brought to the notice of the Department. But there is nothing produced on record by the Department to show any positive act on part of the appellant which may amount to suppression of relevant facts. Resultantly, the demand for a period of more than one year could not have been made. Department could not have invoked the extended period of limitation. Show cause notice issued invoking the greater period is therefore, held to be barred by time. The adjudication based thereupon cannot sustain. The order under challenge fails on merits as well as on technical issue of limitation - Appeal allowed - decided in favor of appellant. Issues:1. Confirmation of duty demand based on evidence from third party premises.2. Invocation of extended period of limitation without evidence of suppression.3. Reliance on presumptive findings without corroborative evidence.4. Use of third party records as evidence for clandestine removal.5. Application of legal precedent on evidence requirements for clandestine removal cases.6. Assessment of limitation period for demand based on regular filing of returns.Analysis:1. The case involved the confirmation of duty demand against the Director of a manufacturing company based on evidence recovered from a third party's premises. The appellant argued that no evidence linked them to the alleged suppression, as all documents were from the third party. The Tribunal found the burden of proof on the Department to establish the appellant's involvement in clandestine activities, which was not met solely by evidence from a different entity's premises.2. The appellant contested the invocation of an extended period of limitation, claiming regular filing of returns and no evidence of suppression. The Tribunal held that without proof of the appellant's active concealment of facts, the extended limitation period could not be applied. As a result, the show cause notice issued beyond the standard limitation period was deemed time-barred.3. The order confirmed the duty demand based on presumptive findings without substantial corroborative evidence. The Tribunal emphasized the necessity of concrete proof in cases of clandestine removal, citing a lack of investigation into crucial aspects like excess production, raw material purchases, dispatch particulars, and power consumption. The reliance on presumptions without thorough evidence was deemed insufficient to uphold the demand.4. The Tribunal addressed the use of third party records as evidence for clandestine removal cases. Legal precedents were cited to emphasize that findings of clandestine activities must be supported by positive evidence directly linking the accused party to the alleged wrongdoing. In this case, the reliance on third party documents without substantial proof of clandestine manufacture and removal was deemed inadequate to confirm the demand.5. The judgment applied established legal principles regarding evidence requirements for cases of clandestine removal, emphasizing the need for tangible proof beyond mere presumptions or assumptions. The decision referenced previous judgments to highlight the importance of clinching evidence related to raw material purchase, electricity use, sale proceeds realization, and other key aspects to substantiate allegations of clandestine activities.6. Regarding the limitation period assessment, the Tribunal considered the regular filing of returns by the appellant as a factor indicating no suppression of facts. Since the Department failed to demonstrate any active concealment by the appellant, the invocation of an extended limitation period was deemed unjustified. Consequently, the demand based on the extended period was held to be time-barred, leading to the allowance of the appeal.