2022 (11) TMI 632 - HC - Central Excise

High Court affirms CESTAT decision, emphasizes need for conclusive evidence to establish clandestine removal

Commissioner, Central GST And Cx 117/7, Sarvaodaya Nagar Versus M/s Raghunath International Ltd. And Others

Commissioner, Central GST And Cx 117/7, Sarvaodaya Nagar Versus M/s Raghunath International Ltd. And Others - TMI Issues Involved:1. Corroboration of retracted confessional statements.2. Justification of duty demand based on third-party documents.3. CESTAT's consideration of evidence and witness statements.4. Setting aside or reducing demand, redemption fine, and confiscation of goods.5. Admissibility of statements recorded under Section 14 of the Central Excise Act.Issue-wise Detailed Analysis:1. Corroboration of Retracted Confessional Statements:The revenue argued that the CESTAT erred in setting aside the demand based on the retracted confessional statements, asserting that these statements did not require corroboration from other independent evidence. The Adjudicating Authority had relied on these statements, especially those of Sri Rajesh Agarwal, who did not retract his statements, to substantiate the clandestine removal of goods. However, the CESTAT found that the statements recorded during the investigation were involuntary and obtained under duress, thus lacking evidentiary value without corroboration.2. Justification of Duty Demand Based on Third-Party Documents:The revenue contended that the demand of duty based on third-party documents, supported by corroborative statements, was justified. They presented evidence of searches and seizures from various premises, including transporters and railway stations, indicating clandestine clearance of goods. However, the CESTAT concluded that the demands were primarily based on third-party records and statements, which were either retracted or did not withstand cross-examination, rendering them unreliable.3. CESTAT's Consideration of Evidence and Witness Statements:The revenue challenged the CESTAT's decision, arguing that it ignored the entire evidence on record and the statements of witnesses. They emphasized that the statements recorded under Section 14 of the Central Excise Act should be taken as proof of statutory violations. The CESTAT, however, found that the statements were recorded under coercion and lacked corroborative evidence. The Tribunal held that without substantial evidence to support the third-party documents, the allegations of clandestine removal could not be confirmed.4. Setting Aside or Reducing Demand, Redemption Fine, and Confiscation of Goods:The revenue argued that the CESTAT unjustifiably set aside or reduced the demand, redemption fine, and confiscation of goods by ignoring material facts. The CESTAT, after examining the entire material on record, concluded that the demands were based on unreliable third-party records and retracted statements. The Tribunal emphasized the need for clinching evidence to prove clandestine removal, which was not provided by the revenue.5. Admissibility of Statements Recorded Under Section 14 of the Central Excise Act:The revenue maintained that statements recorded under Section 14 of the Central Excise Act could be admitted as evidence. However, the CESTAT and the High Court referred to legal precedents, including the decision in M/s. Jindal Drugs Pvt. Ltd. and another vs. Union of India, which highlighted the need for statements to be tested under Section 9D of the Central Excise Act before being admitted as evidence. The High Court noted that the statements recorded under duress could not be given evidentiary value without corroboration.Conclusion:The High Court dismissed the appeals, upholding the CESTAT's decision. It found no substantial question of law arising from the case and emphasized that the findings of the CESTAT were not perverse. The court reiterated the necessity of clinching evidence to prove clandestine removal and held that the retracted statements, lacking corroboration, could not substantiate the revenue's claims. The appeals were deemed devoid of merit and were dismissed accordingly.