Duty demand of Rs. 2.22 crore set aside due to weak evidence on clandestine removal allegations

CESTAT Ahmedabad set aside duty demand of Rs. 2,22,48,302 against appellant firm for alleged clandestine removal. The tribunal found department's case relied primarily on seized diaries and buyer statements, but seizure from factory premises was not established, weakening evidentiary value. Cross-examination of buyers was denied without justifiable reason, making statements inadmissible. Third-party records and weighment slips lacked corroborative evidence. Duplicate invoices and rough accounts failed to substantiate removal allegations. The tribunal held revenue must prove clandestine removal beyond doubt with tangible evidence, which was absent. All penalties were set aside and appeals allowed.

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Issues Involved:
1. Legality of duty demand based on pocket-sized diaries.
2. Validity of duty demand based on weighment slips.
3. Duty demand based on rough accounts (Rojmel) of alleged buyers.
4. Duty demand based on duplicate invoices.

Summary:

1. Legality of Duty Demand Based on Pocket-Sized Diaries:
The Tribunal found that the five pocket-sized diaries, listed at Sr. No. 7 to 11 of Annexure A of the Panchnama dated 22.5.2014, were not properly recorded in the panchnama itself, weakening their evidentiary value. The statements of the partners of the appellant firm, which were retracted, claimed that these diaries were forcibly taken from a residence and related to personal brokerage business, not the factory. The Tribunal noted that the cross-examination of buyers listed in the diaries was denied, making their statements inadmissible u/s 9D of the Act. There was no corroborative evidence of actual manufacture such as raw material procurement, excess electricity consumption, or transportation records. Consequently, the duty demand of Rs. 2,22,48,302/- based on these diaries was set aside.

2. Validity of Duty Demand Based on Weighment Slips:
The Tribunal observed that the weighment slips mentioned the truck number GJ3AX5325 in only 4 out of 58 instances. The partner of the appellant firm denied the weighment of goods related to the factory. The cross-examination of third-party records and statements was denied, making them unreliable. The Tribunal concluded that without tangible and corroborative evidence of actual manufacture and transportation, the duty demand based on weighment slips could not be sustained.

3. Duty Demand Based on Rough Accounts (Rojmel) of Alleged Buyers:
The Tribunal noted that the partner of the appellant firm denied selling goods without invoices to the parties mentioned in the rough accounts. The cross-examination of these buyers was denied, and they were not made parties to the show cause notice, suggesting possible inducement. Without concrete evidence, the duty demand based on rough accounts was not upheld.

4. Duty Demand Based on Duplicate Invoices:
The Tribunal found that the partner of the appellant firm explained that the duplicate invoices related to returned goods or canceled orders. There was no corroborative evidence such as buyer statements or transportation records to support the allegation of removal without payment of duty. The Tribunal emphasized that shortages of raw material and discrepancies in stock records needed to be corroborated with substantial evidence, which was absent. Hence, the duty demand based on duplicate invoices was not tenable.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals with consequential relief, finding that the allegations of clandestine removal were not substantiated with sufficient and tangible evidence.

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