TaxTMI 
TaxTMI 
2026 (2) TMI 904
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....f the documents recovered and statements recorded by the officers of the Directorate General of Central Excise Intelligence, New Delhi ("DGCEI" for short), in respect of one M/s Shree Parasnath Re-Rolling Mills Ltd. (hereinafter referred to as "M/s SPRML"). Summons were issued to various concerned persons and their statements were also recorded. 1.2. During the course of investigation, a statement was recorded from Shri Satpal Bansal, Director of the appellant-company (the appellant no. 2 herein) by the Superintendent of C.E., Anti-Evasion, Durgapur Commissionerate on 06.05.2016. In the statement, the Director of the appellant-company / appellant no. 2 did not agree with the allegations of clandestine removal made against the appellant-company. 1.3. The documents relied upon by the officers against the appellant company were a bunch of loose papers seized from M/s. SPRML and the statements recorded during the course of investigation against M/s SPRML. The appellants contended that the documents relied upon against them have no statutory validity and were not supported by any corroborative evidence. Thus, the appellants did not agree with the allegations of clandestine removal....
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....ity of the investigation to bring in the evidence to substantiate the allegations levelled by them, which they failed to do miserably. It is also contended that the Ld. adjudicating authority has erred in upholding the allegation of clandestine removal without examining any documentary evidence to corroborate the allegation. Therefore, it is the appellant's stand that the demand of central excise duty confirmed without any valid evidence is legally not sustainable. In support of this contention, the appellants rely on the decision of the Tribunal, Ahmedabad in the case of Arya Fibres Pvt. Ltd. vs Commissioner of C. Ex., Ahmedabad-II [2014 (311) E.L.T. 529 (Tri. Ahmd.)], wherein it has been categorically held that the allegations of clandestine manufacture and clearances must be proved by the Revenue with substantial evidence. 2.1. The Ld. Counsel for the appellants pointed out that the demand in this case has been raised and confirmed solely on the basis of private records of a third party viz. M/s SPRML without any corroboration as to clandestine manufacture and clearance by the appellant-company. It is his argument that such confirmation of the duty on the basis of mere assump....
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....e above facts, it is the appellant's contention that the demand of central excise duty raised and confirmed on the basis of these documents is not sustainable. 2.4. Moreover, the Ld. Counsel for the appellants draws attention to the fact that the Department had raised similar demands against M/s. Jai Balaji Industries (Unit III) & Others, on the basis of the documents recovered from the same third party viz. M/s SPRML, without any independent supporting evidence; that the said demands raised have already been dropped by the Tribunal vide Final Order No. 75583-75585/2020 dated 12.11.2020; that similar demands raised against M/s. Puneet Steels & Alloys Pvt. Ltd. vs. Commissioner of C. Ex. & S.T., Alwar [2017 (358) E.L.T. 1253 (Tri. - Del.)] on the basis of the documents recovered from the same third party viz. M/s SPRML have also been dropped. 2.5. On the basis of the submission that there is no corroborative evidence produced by the Department to substantiate the allegations of clandestine removal, other than the private records seized from the premises of M/s SPRML, it is contended by the Ld. Counsel for the appellants that the demands of central excise duty, along with inter....
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....estinely cleared finished goods by the appellant-company to M/s SPRML. 5.1. It is seen that the entire demand in this case has been raised and confirmed on the basis of the private records maintained by M/s. SPRML and the statements given by some of the officers/staff of M/s. SPRML. We observe that the Department has relied on the documents recovered from the premises of a third-party to raise the demand of central excise duty against the appellant. However, copies of the said documents were not supplied to the appellant. The appellants have submitted before us that during the course of personal hearing before the Commissioner of Central Tax, CGST: Bolpur Commissionerate, they had prayed for providing copies of relevant records and documents e.g., 'daily sheet, cash book maintained in tally data format', any seized document 'relating transaction between Haldia Steels Pvt. Ltd. and M/s. SPRPL', on the basis of which the demands have been raised in the Show Cause Notice, but such documents were not furnished to the appellant. Thus, we are of the view that the demand of central excise duty raised and confirmed on the basis of these documents is not sustainable. 5....
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....he appellants. We find that the said documents recovered from M/s. SPRML were the only evidence relied upon by the Revenue in the impugned order. There is no other corroborative evidence to substantiate the allegation of clandestine removal in this case. Under such circumstances, we observe that allowing cross examination of the persons whose statements were relied upon in this case is a mandatory requirement. As the appellant was not allowed cross examination and the principles of natural justice have not been followed in this case, we hold that the said documents recovered from M/s. SPRML and the statements recorded during the course of investigation against M/s SPRML cannot be relied upon against the appellants in these proceedings. Thus, we are of the view that the demand of central excise duty raised and confirmed on the basis of these documents is not sustainable. 7. It is also relevant to note that clandestine manufacture and removal of excisable goods is a serious allegation, which needs to be substantiated through tangible, direct, affirmative and incontrovertible evidences relating to: a. Receipt of raw material inside the factory premises, and non-accountal t....
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....hout payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately mai....
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.... of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal." 7.3. The said issue has also been examined by the Hon'ble High Court of Allahabad in the case of Continental Cement Company v. Union of India [2014 (309) E.L.T. 411 (All.)], wherein it has been held as under: - "10. We have heard the learned counsel for the parties and gone through the material available on record, from which it appears that Shri Shubhashis Dev, Government Examiner of questioned documents, Shimla gave his written opinion dated 12-6-1998, wherein he has stated that "the documents of this case have been carefully and thoroughly examined. The enclosed writings and signatures stamped and marked were all written by one and the same persons". 11. From the above, it appears that all the documents were written by one and the same persons, though the dates and the name of the parties are different. When it is so then the genuineness of the documents cannot be accepted. 12. Further, unless there is clinching evidence of the nature of purchase of ....
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....ate authority, along with the reasons mentioned herein. 17. In the result, all the appeals filed by the appellants are hereby allowed." 7.4. Further, the Tribunal in Nova Petrochemicals v. Commissioner of C.Ex., Ahmedabad-II [Final Order Nos. A/11207-11219/2013 dated 26.09.2013], while dealing with a similar issue, has observed as follows:- "40. After having very carefully considered the law laid down by this Tribunal In the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty. (c) Discovery of such finished good....
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....S Billets without payment of duty. The appellants submit that they would have required huge quantity of raw materials like iron ore, lam coke, steam coal, manganese and scrap. No evidence has been gathered to show the illegal and clandestine procurement of the said raw materials. We find that there is force in the argument of the appellant. In addition to the above, the Department did not produce evidence of consumption of electricity, deployment of labour and production of such billets. We find that without any investigation conducted in that direction, thereto without taking stock of raw materials and finished goods immediately after evidence was found at the end of M/s SPRML, allegation of clandestine removal cannot be sustained. It is also seen that statement of Shri Aditya Jajodia, Managing Director was not even recorded and it is surprising to see that while alleging clandestine removal of that magnitude responsible senior person like the Managing Director was not even questioned. Only Sh. Mohapatra who is an authorised signatory of the appellants has been questioned who did not accept any misconduct on their part. The allegation is only based on the data set to have been rec....
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....11207-11219/2013, dated 26-92013, held as under (in Para 40): ..... 21. We agree to the proposition of the learned Commissioner that the department is not required to prove clandestine removal by mathematical precision. However, the instant case, we find that not even single evidence has been brought on record to show clandestine removal, conclusively establishing at least in a sample transaction. We find that the Annexure-H contains alleged receipts by M/s SPRML date wise from the appellants. The Annexure contains Truck Nos. We do not find any investigation regarding the transportation at least, of which some evidence, in the form of Truck numbers, was available with the department. We also find that no stock verification has been conducted at the appellant's premises to see if there were any discrepancies in the stock of raw material, finished products etc. The allegation is about clandestine removal of a huge quantity of 13,683.05 MT valued at Rs.52.00 Crores. To prove evasion of such magnitude, the department should have established the purchase of raw material, consumption of electricity, deployment of labour, arrangement of transportation, receipt at the....