2024 (9) TMI 177 - AT - Central Excise

Revenue demands set aside for clandestine removal and stock shortage due to lack of corroborative evidence and improper limitation period invocation

M/s. Premier Power Products (CAL) Pvt. Ltd. Versus Commr. of Central Excise, Haldia Commissionerate, M/s. Neha Power Tech (I) Pvt. Ltd. Versus Commr. of Central Excise, Haldia Commissionerate And Dharmendra Kumar Daga, Director Versus Commr. of Central Excise, Haldia Commissionerate

CESTAT Kolkata set aside demands for clandestine removal and stock shortage. The tribunal found Revenue failed to provide corroborative evidence beyond ... Clandestine removal - shortage of stock - suppression of material facts - demand raised on the strength of private records - absence of corroborative evidence - time limitation - HELD THAT:- There is no allegation that any private records were recovered towards the receipt of the clandestine proceeds by way of cash. Apart from this, the clandestine clearance would entail not only dispatch, but purchase of raw materials, excess consumption of electricity [which is not accounted for in the normal course], inward movement of raw materials and consumables and finally outward movement of the clandestinely removed goods. No details in these areas have been gathered by the Revenue. The bare minimum requirement would be to verify the outward movement details by questioning the truck owners/transporters, when the vehicle numbers are purportedly been shown in the recovered diary/note sheets. Thus, the Revenue with the sole evidence coming in the form of the recorded Statements of the Director Mr Daga on three occasions - the Revenue has not discharged its onus to prove the clandestine manufacture and dispatch of the goods in question with proper corroborative evidence. Shortages found during the stock verification - HELD THAT:- The verification report is not corroborated by way of supporting documents like weighing slip, quantification method adopted etc. As the appellant has submitted, in some case, the stock taking process could not have been completed in the short time said to have been taken to arrive at the actual quantity of stocks. The appellant’s arguments that the stock taking should have been taken in the presence of the Panchas cannot be subscribed. It would be sufficient if the same taken in the presence of the officials of the appellant, which has been done in this case. However, the details of the method adopted to quantify the stocks is not to be seen from the Revenue’s investigation - The ratio laid down in the above decisions is squarely applicable to the facts of the present case. Accordingly, the confirmed demands towards the shortage found during the stock taking is legally not sustainable. Time Limitation - HELD THAT:- The Revenue had no case to invoke the extended period to confirm the demand, when the issue has come to their knowledge in July 2008. Therefore, the impugned order set aside even on account of limitation. All the appeals are allowed both on merits and on account of limitation. Issues Involved:1. Allegation of clandestine removal.2. Shortages found during stock verification.3. Admissibility and evidentiary value of statements recorded.4. Time-barred issuance of Show Cause Notice.5. Penalty imposed on the Director.Detailed Analysis:1. Allegation of Clandestine Removal:The appellants were accused of clandestinely removing finished goods based on documents seized during a raid, including a diary and a writing pad with entries matching some of the appellant's Central Excise invoices. However, the Tribunal found that 'there was no evidence on record to establish actual clandestine clearance or any attempted clandestine clearance.' The Tribunal emphasized the lack of corroborative evidence such as statements from buyers, transporters, or any proof of flow-back of funds. The Tribunal cited several case laws, including *Gautam Ferro Alloys v. Commissioner of Central Excise, Ranchi* and *Ambica Iron and Steel Pvt. Ltd. v. Commissioner of C.Ex., Cus. & ST*, which held that allegations of clandestine removal cannot be sustained solely on the basis of private records without corroborative evidence.2. Shortages Found During Stock Verification:During the raid, shortages of finished goods were found, but the Tribunal noted errors in the stock verification process. Specifically, the stock-taking report 'did not bear the signature of any witness,' and the physical weighing of over 1000 meters of cable tray in a few hours was deemed 'a physical impossibility.' The Tribunal concluded that the shortages were not properly established, relying on case laws such as *Scan Sponge Iron Ltd. v. Commissioner of Central Excise, Bhubaneshwar-II* and *Jai Balaji Industries Ltd. v. Commissioner*, which emphasized the need for proper documentation and verification methods during stock-taking.3. Admissibility and Evidentiary Value of Statements Recorded:The Tribunal found that the statements recorded from the Director, Sri Daga, lacked evidentiary value. The first statement was recorded under duress, and subsequent statements did not corroborate the initial one. The Tribunal cited *Narsingh Ispat Ltd. vs. Commissioner* and *Ambika International v. UOI*, which held that statements must be made out of free will and without coercion to be admissible.4. Time-Barred Issuance of Show Cause Notice:The Show Cause Notice issued on 28.03.2011 was deemed time-barred as the initial investigation was completed in July 2008, with no further action taken for over two years. The Tribunal found that the delay in issuing the notice was unjustified and cited *Lovely Food Industries v. CCE Cochin*, which held that delayed issuance of a Show Cause Notice can render the notice time-barred.5. Penalty Imposed on the Director:The Tribunal set aside the penalty imposed on the Director, stating that 'no specifics have been brought in to show that any clandestine removal has taken place.' The Tribunal concluded that the penalty was unjustified due to the lack of concrete evidence.Conclusion:The Tribunal allowed the appeals on both merits and on account of limitation, setting aside the confirmed demands and penalties. The appellants were deemed eligible for consequential relief as per law. The judgment emphasized the necessity of corroborative evidence in cases of clandestine removal and the importance of timely issuance of Show Cause Notices.