2022 (9) TMI 433 - HC - Central Excise

Court affirms Tribunal decision on duty evasion; Revenue appeal dismissed for lack of evidence

The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision that the Revenue failed to provide concrete evidence of clandestine ... Maintainability of appeal - appropriate forum - Clandestine Removal - grey fabrics - yarn cleared without payment of duty by M/s. Filatex under Rule 12B of Central Excise Rules, 2002 to their job workers - yarn diverted and sold elsewhere and records & payment transactions had been manipulated for such fictitious sale of fabrics - POY has been diverted without payment of duty under the garb of its clearance under the Rule 12B of Central Excise Rules, 2002. HELD THAT:- An appeal shall lie against the order of the Appellate Tribunal if the High Court is satisfied that the case involves a substantial question of law. The Revenue appears to be agitating factual aspects in the matter. A perusal of the Tribunal order indicates that the Tribunal after having heard both sides and after having perused the case records has given a fact finding on the issues raised on behalf of the Appellant-Revenue. It has found that in the present case the fabric was shown to have been manufactured from six job workers, viz., M/s. Rama Filament Pvt. Ltd., M/s. Geena Synthetics Pvt. Ltd., M/s. A. P. Textiles Ltd., M/s. Mansa Synthetics Pvt. Ltd., M/s. Micro Polyester Pvt. Ltd. and M/s. Good Luck Synthetics Ltd. The Tribunal has given a finding that it is undisputed that the Department was in knowledge of the job work activities, that while sending goods, the challans were prepared and the yarn was acknowledged by the job workers of having been received. Respondent-Company has paid job work charges to the said job workers and also deducted TDS on such payments as found by the Tribunal from Form-16A issued to all six job workers. It is also recorded by the Tribunal that during investigation, the statements of the Joint Managing Director, Director and employees of Respondent-Company were recorded and all of them has stated that the goods were sent for job work. The Tribunal also records that in respect of M/s Geena Synthetics, M/s. Rama Filaments, M/s. Mansa Synthetics, M/s. Micro Polyester and M/s. Good Luck Synthetics were existing at the time of investigation. It is further recorded that none of the statements from the job workers recorded by the investigation deny the fact that they had undertaken job work activity on behalf of Respondent-Company. All the factual aspects raised on behalf of the Revenue, appear to have been answered by the Tribunal. The Revenue has not been able to controvert any of these findings nor is there any material shown to us that demonstrates anything to the contrary. Appeal dismissed. Issues Involved:1. Alleged clandestine removal of goods without payment of central excise duty.2. Validity of the investigation and evidence presented by the Revenue.3. Findings and conclusions of the CESTAT.4. Applicability of the legal principles and precedents cited by the Revenue.Detailed Analysis:1. Alleged Clandestine Removal of Goods Without Payment of Central Excise Duty:The Appellant-Revenue alleged that the Respondent-Company clandestinely removed 1,687,585.511 kilograms of polyester yarn without paying central excise duty. The Revenue argued that the yarn was cleared without payment to six job workers for the manufacture of grey fabrics, and further investigation revealed that some job workers were non-existent or lacked machinery to manufacture the fabrics. Summons issued to buyers were mostly returned undelivered, and one buyer denied any transactions with the Respondent-Company.2. Validity of the Investigation and Evidence Presented by the Revenue:The Revenue's investigation suggested that the Respondent-Company manipulated records and payment transactions to facilitate fictitious sales of fabrics. Based on these findings, a show-cause notice was issued, demanding duty of Rs. 3,11,76,080/- along with interest and penalties. The Order-in-Original confirmed the demand but dropped proceedings to confiscate goods and impose penalties under Rule 25 of the Central Excise Rules, 2002.3. Findings and Conclusions of the CESTAT:The CESTAT, in its order dated 11th April 2019, allowed the Respondent-Company's appeal, stating that the Revenue failed to provide any concrete evidence of clandestine removal. The Tribunal emphasized that no single buyer of yarn was identified, nor were there any statements from the company's employees or directors admitting to clandestine removal. The Tribunal cited the case of CCE, Rajkot Vs. Kalyan Glaze Tiles, which held that charges of clandestine removal must be based on clinching evidence, not surmises and conjectures. The Tribunal found that the Respondent-Company had followed procedural requirements, such as filing intimations with the Department and preparing challans for job work. Job work charges were paid, and TDS was deducted, as evidenced by Form-16A issued to the job workers. The Tribunal concluded that the Revenue's allegations were unsubstantiated and set aside the impugned order.4. Applicability of the Legal Principles and Precedents Cited by the Revenue:The Revenue cited the judgment in Collector of Customs, Madras & Others Vs. D. Bhoormull, arguing that the burden of proof in quasi-criminal proceedings does not require mathematical precision but a degree of probability that a prudent person would accept. However, the High Court found that the Tribunal's factual findings were based on substantial evidence and could not be faulted. The High Court emphasized that the Tribunal's findings were not perverse and that the Revenue had failed to demonstrate any substantial question of law.Conclusion:The High Court dismissed the Revenue's appeal, stating that the Tribunal's findings were based on substantial evidence and were not perverse. The High Court held that the question framed by the Revenue was a question of fact, not law, and did not raise any substantial question of law. Consequently, the appeal was dismissed with no costs.