Department fails to prove clandestine removal charges against manufacturer lacking corroborative evidence and proper investigation

CESTAT New Delhi dismissed the department's appeal challenging the Principal Commissioner's order exonerating the respondent from clandestine removal charges. The tribunal upheld findings that the department failed to substantiate allegations of unauthorized removal of excisable goods to various parties through corroborative evidence. The Principal Commissioner's meticulous examination of records, including audited sales figures and excise duty computations, established no clandestine removal occurred. The department could not demonstrate specific errors in the reconciliation of figures or challenge the categorical findings that proper investigations were not conducted at supplier premises. The charges required clinching evidence beyond presumptions and assumptions, which the department failed to provide across all alleged transactions.

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Issues Involved:
1. Clandestine removal of excisable goods to M/s. MARKFED & MP Agro.
2. Clandestine removal of excisable goods to M/s. Aviral Biotech and Fertilizers Pvt. Ltd. (ABFPL).
3. Clandestine removal of excisable goods to M/s. Sumitra Agrotech (SA).
4. Clandestine removal of excisable goods to private parties/Dealers.

Summary:

Issue 1: Clandestine removal to M/s. MARKFED & MP Agro
The Principal Commissioner meticulously examined the records, including excise returns and audited financial statements, and found no evidence of clandestine removal. It was noted that the department failed to substantiate the allegations with tangible evidence. The reconciliation of figures showed no discrepancy, and the payment sheet from MP Agro was not properly verified. The Principal Commissioner concluded that the allegations were unsustainable due to lack of evidence and computational errors, leading to the dropping of the demand of Rs. 3,30,13,508/-.

Issue 2: Clandestine removal to M/s. Aviral Biotech and Fertilizers Pvt. Ltd. (ABFPL)
The Principal Commissioner found that the accounts of ABFPL were unreliable and incomplete. The raw material receipts matched the finished goods sold, and no evidence of excess procurement was found. The department's case was based on assumptions without corroborative evidence. The Principal Commissioner emphasized that serious charges like clandestine removal require substantial evidence, which was lacking. Consequently, the demand of Rs. 90,22,112/- was set aside.

Issue 3: Clandestine removal to M/s. Sumitra Agrotech (SA)
The Principal Commissioner noted that the case was based on third-party records without any clinching evidence. No discrepancy was found in the stock, and no investigation was carried out at the premises of raw material suppliers. The department's allegations were based on assumptions and lacked corroborative evidence. The Principal Commissioner concluded that the case of clandestine removal was not established.

Issue 4: Clandestine removal to private parties/Dealers
The Principal Commissioner observed that the allegations were not supported by sufficient corroborative facts and evidence. No linkages were investigated to establish the findings. The Principal Commissioner reiterated that the case of clandestine removal requires documentary and material evidence, which was absent in this case. Therefore, the demand of Rs. 12,96,503/- was not sustained.

Conclusion:
The appeal filed by the department was dismissed as there was no perversity in any of the findings recorded on the four issues. The Cross Objections were disposed of accordingly.

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