2002 (1) TMI 151 - AT - Central Excise

Seized private notebook used to allege clandestine explosives manufacture and removal; demand and penalties set aside for lack of proof.

The dominant issue was whether alleged clandestine manufacture/removal and shortages/non-maintenance of statutory records could be sustained solely on a ... Penalty on shortages found in the premises and for non-maintenance of F-4 Registers - Demand - Clandestine removal - absence of corroborative evidence - HELD THAT:- Admittedly the only piece of evidence is a notebook seized from the premises of the appellant. It was brought to the notice of the seizing officers that it was maintained by the Accountant who was very much present during the time of investigation. It was the duty of the investigating officers to have sought explanation from the said Accountant with regard to the entries made therein. Non-examination of the Accountant has rendered the document inadmissible in evidence. It is seen that the appellants have also brought to the notice of the Revenue that fireworks are required to be insured mandatorily while removing the same and various authorities are required to be informed and permission obtained. Revenue has not examined this point in the correct perspective. The danger of removal and penal consequence of non-insurance is a serious matter and the Commissioner ought to have relied on same evidence to show as to how they could manufacture and remove such controlled explosive commodity without proper protection and insurance. Merely to give finding that such clandestine removal is done secretly and stealthily and they do not follow the law is not acceptable in the peculiar facts and circumstances of this case. There is no other corroborative evidence with regard to the sale and purchase by particular persons and there is no evidence of removal through any transporter and the transporters have not been examined and statements recorded. Each link in the aspect of production and clandestine removal is required to be proved and since this has not been done, the demands are required to be set aside for lack of evidence in the matter. It has been laid down by the Tribunal, as in the case of Kashmir Vanaspati [1988 (12) TMI 178 - CEGAT, NEW DELHI], that a private notebook cannot be a conclusive piece of evidence to prove clandestine removal. Large number of judgments have been rendered by this bench and the matter has been analysed carefully and the Tribunal has laid down that proof is required to be produced by the department for clandestine removal as in the case of Krishna Bottlers [1999 (2) TMI 670 - CEGAT CHENNAI]. The above citations also deals with each of the factors required to be proved and it has been laid down very conclusively in the cited judgments that the scribe of the notebook is required to be examined and details of the notebook is required to be proved as in the case of CCE v. Raman Ispat (P) Ltd.[2000 (7) TMI 118 - CEGAT, NEW DELHI], CCE Mumbai v. Mira Silk Mills[1999 (1) TMI 156 - CEGAT, MUMBAI], CCE Patna v. Universal Polythene Industires [2000 (6) TMI 84 - CEGAT, KOLKATA]. In view of the Revenue not having proved any evidence of the manufacture or removal without payment of duty in this case except the seized notebook which entries has not been proved including the scribe not having been examined, therefore applying the ratio of all the judgments noted supra, the impugned order is set aside and the appeals are allowed. Issues Involved:1. Penalty for shortages and non-maintenance of F-4 Registers.2. Clandestine removal and quantum of duty based on a seized notebook.3. Examination of evidence and corroborative proof.Summary:1. Penalty for shortages and non-maintenance of F-4 Registers:The CEGAT had previously confirmed penalties on the firm for shortages found in the premises and for non-maintenance of F-4 Registers. The penalty on the partner, Shri Rajagopal, was also confirmed for these reasons.2. Clandestine removal and quantum of duty based on a seized notebook:The matter was remanded for de novo consideration regarding the clandestine removal and the quantum of duty confirmed based on a single notebook recovered from the appellants' premises. The Commissioner re-confirmed the demands despite the notebook's scribe not being examined. The Commissioner noted that the Accountant who maintained the notebooks could not be contacted as he had left the service and his whereabouts were unknown. The appellants argued that the notebook was for salary disbursement, but the Commissioner found this interpretation unconvincing.3. Examination of evidence and corroborative proof:The Commissioner dismissed the appellants' plea that they were unaware of the notebook until the inspection, stating that the notebook was recovered under a mahazar drawn before independent witnesses. The appellants contended that the production of fireworks worth Rs. 1.09 crores was impossible without sufficient funds and regulatory oversight. The Commissioner countered that the production spanned a long period and the accounting system was unreliable. The Commissioner also dismissed the need for corroborative evidence from transporters and insurance companies, stating that clandestine removal is inherently secretive.The Tribunal observed that the findings were based on presumptions and assumptions. It emphasized that the Revenue must corroborate the entries in the seized notebook with other evidence, such as the purchase of raw materials, manufacture, sale, and receipt of funds. The non-examination of the Accountant, who was present during the raid, rendered the notebook inadmissible. The Tribunal noted that the Revenue failed to prove the purchase of raw materials and the manufacture of fireworks without proper protection and insurance. The absence of corroborative evidence regarding the sale and transportation of the goods weakened the Revenue's case.Conclusion:The Tribunal concluded that the demands and penalties were based solely on the seized notebook, which was not corroborated by other evidence. The impugned order was set aside, and the appeals were allowed.