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 ... Substantial question of law - appeal under Section 35G of the Central Excise Act, 1944 - clandestine removal - appellate tribunal's findings of fact binding on the High Court - onus and sufficiency of evidence in quasi criminal proceedingsSubstantial question of law - appeal under Section 35G of the Central Excise Act, 1944 - appellate tribunal's findings of fact binding on the High Court - Whether the case involves a substantial question of law permitting admission of an appeal under Section 35G. - HELD THAT: - The High Court examined Section 35G and the Tribunal's order and found that the appellant was principally challenging factual findings recorded by the CESTAT. The Tribunal had considered the record, evidence and statements and reached fact findings regarding job work intimations, acknowledgments, payment of job work charges and TDS, and acceptance by job workers that they undertook manufacture of fabrics. Those findings are factual determinations by the final fact finding authority. The High Court held that the question framed by Revenue was essentially factual and did not raise any substantial question of law for determination under Section 35G. Consequently, the appeal could not be admitted on the ground alleged by Revenue. [Paras 16, 17, 18, 19, 22]The Court held that no substantial question of law is involved and the appeal under Section 35G is not maintainable on the facts presented.Clandestine removal - onus and sufficiency of evidence in quasi criminal proceedings - appellate tribunal's findings of fact binding on the High Court - Whether the CESTAT erred in holding that there was no satisfactory evidence of clandestine removal or diversion of yarn and in accepting that job work was undertaken. - HELD THAT: - The Tribunal found that intimations under the Central Excise Rules were filed, challans existed, job workers had acknowledged receipt, job work payments were made and TDS reflected by Form 16A, and that most job workers accepted undertaking the manufacturing of fabrics. The Revenue's contention that certain job workers were non existent, lacked machinery, or that buyers could not be traced were weighed by the Tribunal and rejected as insufficient to establish clandestine removal. The High Court reviewed these factual findings, noted absence of material to overturn them before this Court, and reiterated that allegations of clandestine removal require positive and corroborative evidence; it found no perversity or legal error in the Tribunal's evaluation of the evidence and declined to re appraise the factual conclusions. [Paras 17, 18, 19, 20, 21]The Court upheld the Tribunal's factual conclusions that job work was undertaken and that the Revenue failed to prove clandestine removal, refusing to disturb the CESTAT's findings.Final Conclusion: The appeal is dismissed: the High Court found no substantial question of law under Section 35G and declined to interfere with the CESTAT's factual findings that job work was undertaken and that allegations of clandestine removal were not supported by corroborative evidence. 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.