Appeal allowed against clandestine manufacture demand due to lack of cogent evidence and reliance on conjectures

CESTAT Kolkata allowed the appeal, setting aside the demand for clandestine manufacture and clearance of goods. The tribunal found the Revenue's case was based on conjectures and surmises without cogent evidence. The department failed to establish alleged clandestine movement despite clear evidence that goods were sold ex-factory with proper duty payment. Sale invoices showed ex-factory sales, raw material receipt was explained, and payments were made through banking channels. Out of 61 cases, only 33 showed vehicle number discrepancies, insufficient to prove clandestine clearance. The tribunal held serious charges cannot be established on mere circumstantial evidence and presumptions.

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Issues: Allegation of clandestine manufacture and clearance of goods, demand of duty, penal liability on manufacturer and Chairman & Managing Director, violation of principles of natural justice.

Analysis:
1. The case involves an appeal against an Order-in-Original passed by the Commissioner of Customs, Central Excise & Service Tax, Durgapur Commissionerate, alleging clandestine manufacture and clearance of goods by the appellant, a manufacturer of iron and steel products. The appellant supplied goods to a buyer on ex-factory basis, but the department contended that the goods were not physically delivered to the buyer, leading to a demand for duty and proposals for penal liability on the manufacturer and Chairman & Managing Director.

2. The Tribunal observed that the Revenue's case lacked concrete evidence to prove clandestine activities. The appellant argued that the goods were sold ex-factory, payments were received through banking channels, and discrepancies in vehicle numbers on invoices did not establish clandestine activities. The department's case relied on conjectures and surmises, without conclusive proof of wrongdoing by the appellant.

3. The Tribunal emphasized that the department's case was weak, built on presumptions rather than substantiated evidence. The appellant demonstrated receipt of duty-paid material, manufacturing of finished goods, and proper payment of Central Excise duty and Cess. The department failed to establish clandestine movement of goods or dispute the duty paid by the appellant, leading to a lack of grounds for re-demanding duty along with interest.

4. The appellant also raised a procedural issue regarding the denial of cross-examination of a crucial witness by the lower authority, highlighting a violation of principles of natural justice. The Tribunal found that the lower authority's failure to address this issue warranted setting aside the order, further weakening the department's case against the appellant.

5. Ultimately, the Tribunal set aside the order of the lower authority and allowed the appeals, concluding that the department's case was insufficiently supported by corroborative evidence and relied heavily on unfounded presumptions and surmises. The judgment was pronounced on 09 Oct 2024, in favor of the appellant.

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