1992 (12) TMI 159 - AT - Central Excise

Tribunal Exonerates Tread Rubber Maker, Says Suspicion From Third-Party Records Cannot Prove Clandestine Removal Alone

The CEGAT allowed the appeal, setting aside confiscation and penalties for alleged clandestine manufacture and removal of tread rubber. It held that the ... Adjudication - clandestine removal of excisable goods without payment of duty - benefit of doubt - Confiscation and penalty - whether the evidence on record brings home the charge of manufacture and clandestine removal of tread rubber by appellant for the period in question as set out in the show cause notice - HELD THAT:- In case of this kind when investigating authorities have seized Anamath account it is paramount on their part to make verification of the correctness of the entries therein by contacting various persons with whom transactions are entered in the said account and also scrutinise accounts of the various buyers to establish connection of the appellant with those persons concerned in regard to the transactions. In the present case, apart from the fact that a thorough and proper investigation was not conducted till after officers of the Anti Evasion Directorate came on the scene, we are not able to appreciate as to how on incomplete investigation show cause notice was issued on 29-10-1982 and later subsequent to further investigation by the Anti Evasion Directorate a second show cause notice came to be issued on 9-9-1985. We are also at a loss to understand as to why after initial issue of show cause notice dated 29-10-1982 after receipt of reply dated 19-4-1983 there was no action at all for nearly three years till after second show cause notice was issued on 9-9-1985. No raw rubber was admittedly seized in this case nor any source of supply of raw rubber clearly established by evidence against the appellant. There are only vague circumstances which may give rise to suspicion which can scarcely be substituted for proof. Finding in the impugned order that 55 slips recovered from the residence of Raja Rao “are nothing but work sheet containing transaction and the amounts are meant to be handed over to the appellant” is not sustainable on facts or in law. We are not able to see as to why no investigation has been done for this omission nor the learned SDR could explain the same. Therefore on consideration of entire evidence on record, we are inclined to think that evidence on record does not bring home the charge of clandestine removal levelled against the appellant in the show cause notice. We should indeed confess that the circumstances appearing in evidence on record do engender in our minds a very grave suspicion and the proceedings being penal in nature it is well settled that suspicion however grave it might be, can scarcely take the place of proof. It is also equally well established that onus of proof of clandestine removal is on the Department, proceedings being penal in nature. Since the evidence available on record is hardly sufficient to sustain the charge set out in the show cause notice, we are inclined to think that the appellant should be given the benefit of doubt in the facts and circumstances of the case particularly when the proceedings are penal in nature. We, therefore, give the appellant the benefit of doubt arising in the facts and circumstances of the case and exonerate him of the charge and set aside the impugned order and allow the appeal. In the light of our findings above we do not feel called upon to go into the question with reference to the price per Kg. or the rate at which the goods manufactured and allegedly removed illicitly by the appellant was sold. In the result, the appellant is given the benefit of doubt and the appeal is allowed. Issues Involved:1. Charge of clandestine removal of excisable goods.2. Reliability of evidence, including statements and documents.3. Adequacy of investigation by the Department.4. Legal burden of proof on the Department.Summary:Charge of Clandestine Removal:The main issue for consideration was whether the evidence on record substantiated the charge of clandestine removal of tread rubber by the appellant for the period in question as set out in the show cause notice. The Department's case relied heavily on the 'Anamath account' and other documents seized during the investigation.Reliability of Evidence:The appellant contended that the statements of Madhusudhana Rao and Raja Rao, who were aggrieved against him, were fabricated. The appellant also argued that no reliance could be placed on the statement of K.P. Menon, who admitted in cross-examination that his statement was made in collusion with the officers. The adjudicating authority's reliance on the 'Anamath account' without corresponding verification of the entries therein was also challenged.Adequacy of Investigation:The investigation was found to be incomplete. The Department failed to verify the entries in the 'Anamath account' by contacting various persons with whom transactions were recorded. The initial show cause notice was issued on 29-10-1982, and a second notice was issued on 9-9-1985 after further investigation. The delay and lack of thorough investigation were noted.Legal Burden of Proof:The onus was on the Department to prove the charge of clandestine removal. The absence of cash balance as per the 'Anamath account' and the lack of seizure of raw rubber or any clear source of supply further weakened the Department's case. The adjudicating authority's reasoning that the appellant had not proved that the DDs were not received for illegal sales was found untenable in law. The appellant cannot be called upon to prove a negative; it was for the Department to establish the connection.Conclusion:The evidence on record did not sufficiently establish the charge of clandestine removal. The proceedings being penal in nature, the appellant was given the benefit of doubt. The impugned order was set aside, and the appeal was allowed. The appellant was exonerated of the charge due to insufficient evidence.