2024 (7) TMI 1456 - AT - Central Excise

CESTAT sets aside penalties for alleged clandestine removal of CTD bars and TMT rods due to insufficient evidence

CESTAT Chennai set aside the order alleging clandestine removal of CTD bars and TMT rods by appellants. The tribunal found seized cash was explained as ... Clandesine Removal - CTD bars and TMT rods - seizure of cash - addition based on the statements of the employees - discrepancy as regards the excess supply over and above the invoice to Raasi Traders - whether the Department has established the clandestine removal as alleged and upheld in the impugned order?. Cash seized - addition based on the statements of the employees - HELD THAT:- The cash found and seized from the 1st Appellant has been explained to be the advance received from M/s. Nagaraja Agencies, which is also supported by the statements of the employees as well as the proprietor of M/s. Nagaraja Agencies and hence, the said cash was not attributable to the alleged clandestine sale. In any case, the addition was made solely based on the statements of the employees which statements have been retracted on a later point of time. Thus, a reasonable belief that the said amount did not represent the sale proceeds of the clandestinely removed goods has to be drawn because no incriminating evidence was found during the search, and nor is there any supporting evidence to this effect. Alleged discrepancy as regards the excess supply over and above the invoice to Raasi Traders - HELD THAT:- The Department has not denied the contention of the 2nd appellant that in the book seized from Raasi Traders, name of the first appellant is not reflected, even in their letter dated 28.8.2012 they have clarified that they did not purchase any goods without invoice from the first appellant. The document seized from Raasi Traders does not contain or show the appellant’s name as alleged by the Revenue and in any case, there is also no corroborative evidence to support the Revenue’s case. The said letter is clearly a retraction to the earlier statement of the Partner and apart from this, there is absolutely no other evidence, much less any incriminating evidence placed on record, that was unearthed by the search team. The department has nowhere denied the facts as explained by the 2nd appellant that the document alleged to be seized from their premises did not show anywhere the name of the first appellant who is alleged to have supplied goods in excess. It also remains undisputed about the clarification offered by the 2nd appellant as regards the alleged excess stock found vis-à-vis the actuals found in their book and hence, the alleged excess stock was nothing to do with the 1st appellant. The department has not established clandestine removal or clandestine sale by the 1st appellant and nor has the department succeeded in corroborating the alleged excess supply to Raasi Traders to be of clandestinely sold goods. Hence, there was nothing on record to justify even the levy of penalties and interest and therefore, the interest charged on the appellants and the penalties imposed on them cannot sustain. The impugned order is set aside - appeal allowed. Issues involved:1. Alleged clandestine removal of CTD bars and TMT rods without payment of Central Excise duty.2. Seizure of cash during search operation.3. Statement obtained under duress/coercion.4. Excess supply over and above the invoice.5. Alleged discrepancies in the account statement.6. Levy of penalties and interest.Analysis:1. Alleged clandestine removal of CTD bars and TMT rods without payment of Central Excise duty:The Department suspected the taxpayer of engaging in the clandestine manufacture and removal of CTD bars and TMT rods. Despite initial findings and statements, the investigation did not yield incriminating evidence beyond the seized cash. The Tribunal observed that no concrete evidence supported the alleged clandestine activities, leading to the conclusion that the Department failed to establish the clandestine removal as claimed.2. Seizure of cash during search operation:The cash seized from the premises of the first appellant was explained as an advance received for the supply of steel rods, supported by statements from employees and another party. The Tribunal noted that the cash was not linked to the alleged clandestine sale, especially since the employees' statements were retracted later. The lack of incriminating evidence during the search further weakened the Department's case.3. Statement obtained under duress/coercion:A statement obtained from a partner of the second appellant, admitting to excess receipt of TMT bars, was contested by the taxpayer as being coerced. The Tribunal highlighted the absence of corroborative evidence and the partner's subsequent clarification, undermining the credibility of the initial statement obtained under duress.4. Excess supply over and above the invoice:The Department alleged that the second appellant received goods in excess of the invoices issued by another party. However, the second appellant refuted these claims, presenting evidence to support their position. The Tribunal found no conclusive evidence to substantiate the Department's allegations of excess supply without invoices.5. Alleged discrepancies in the account statement:Regarding the alleged discrepancy in the account statement of the second appellant, the Tribunal noted that the Department failed to refute the appellant's explanations and evidence. The lack of supporting evidence and the discrepancies highlighted by the appellant weakened the Department's case.6. Levy of penalties and interest:In light of the above analysis and the failure of the Department to substantiate the allegations, the Tribunal concluded that there was no justification for the penalties and interest imposed. Consequently, the Tribunal set aside the impugned orders, allowing the appeals with any consequential benefits as per the law.In conclusion, the Tribunal found that the Department did not establish the alleged clandestine activities or excess supply, leading to the reversal of penalties and interest imposed on the appellants.