2026 (4) TMI 61 - AT - Central Excise

Clandestine removal demands fail without corroboration and Section 9D compliance for witness statements.

A demand for central excise duty based on alleged clandestine removal was unsustainable where it rested mainly on third-party records and untested ... Clandestine removal - Third-party records - Section 9D compliance - Corroborative evidence Clandestine removal - Section 9D compliance - Third-party records - Corroborative evidence - Admissibility of Statements - cryptic and non-speaking order passed in gross violation of the principles of natural justice - HELD THAT:- The Tribunal held that the controversy stood covered by its earlier decision in Amiya Steel Pvt. Ltd. [2025 (11) TMI 1692 - CESTAT KOLKATA], arising from the same investigation. It found that no incriminating material had been recovered from the appellant's premises and that there was no investigation establishing excess production, procurement of excess raw material, mode of manufacture, sale of the alleged clandestinely cleared goods, or excess power consumption. The recorded statements, relied upon as the foundation of the case, were held to have no evidentiary value since the procedure mandated by Section 9D had not been followed. In the absence of such compliance and in the absence of cogent corroboration beyond third-party material, the charge of clandestine removal was held to be unsustainable. [Paras 9, 10] The duty demand on the allegation of clandestine removal was set aside, and the connected penalties were held to be not imposable. Final Conclusion: The Tribunal held that the allegation of clandestine removal was unsupported by legally admissible and corroborative evidence. The impugned order confirming duty and penalties was therefore set aside and the appeal was allowed with consequential relief. Issues: Whether the demand of central excise duty and penalty for alleged clandestine removal was sustainable when the case rested mainly on third-party records and statements, and whether such statements could be relied upon without compliance with the mandatory procedure under Section 9D of the Central Excise Act, 1944.Analysis: The proceedings were founded on records recovered from a buyer and statements recorded during investigation, while no incriminating material, stock discrepancy, excess raw material consumption, transport evidence, sale proceeds trail, or power-consumption evidence was gathered from the appellant's premises. The statements relied upon were not tested in the manner required by Section 9D of the Central Excise Act, 1944, and the adjudication also lacked the broader corroboration necessary to establish clandestine removal, which is a serious charge requiring cogent evidence rather than assumption and presumption. The absence of proper investigation into production, procurement, movement and clearance of goods further weakened the demand.Conclusion: The demand of duty and the consequential penalty were unsustainable. The impugned order was set aside and the appeal was allowed in favour of the assessee.