Charges Of Clandestine Removal Cannot Be Confirmed On The Basis Of Private Records Without Corroborative Evidence: CESTAT

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that charges of clandestine removal cannot be confirmed on the basis of private records, the authenticity of which was doubted by the manufacturer without any corroborative evidence.

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the onus to establish clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by the production of sufficient evidence.

The appellant/assessee is in the business of manufacturing Copper and Copper Alloy articles. On the basis of intelligence, it was alleged that the assessee cleared the goods namely Copper wire/Rod/Pipe/tube without the cover of the Central Excise invoices, without payment of Central Excise Duty and without accounting in their books of account. The searches were conducted by the officers of DGCEI at the premises and seized several records and documents. The officers recorded the statements of various persons including employees and partners of the Appellant and also the transporters, amongst others.

The appellant contended that all the details related to third parties without any corroborating evidence are not reliable in the eyes of law. Therefore the demand of duty is liable to be set aside. It was also evident that duty has also been calculated on the items which were not even manufactured by the Appellant such as Copper wires, rubber tubes, bath tubes, copper utensils, and plastics goods thus duty cannot be demanded from the Appellant.

The appellant stated that the order has been passed in grave violation of the principles of natural justice. The department has relied upon the statement of 18 witnesses in the show cause notice in respect of which the Appellant made various correspondences to the adjudicating authority for the cross-examination of the witnesses. However, except for four witnesses, cross-examination of 14 witnesses was not allowed by the adjudicating authority. Therefore the statement of these 14 witnesses cannot be relied upon.

The Tribunal held that the duty demand cannot be confirmed unless it is shown that the manufacturer had procured all the raw materials required to manufacture the goods.

"We find that the Department has failed to prove the allegations against the appellant. The confirmation of duty demand along with interest and penalty against the appellant is, therefore, held to have been confirmed without any cogent basis. Order under challenge is, accordingly, hereby set aside. As a consequence thereto, the appeals are allowed," the ITAT said.

Case Title: Metal Gems Versus C.C.E. & S.T.-Daman

Citation: Excise Appeal No.12432 of 2019

Date: 07.10.2022

Counsel For Appellant: Advocate Ankur Upadhyay

Counsel For Respondent: Superintendent (AR) Vinod Lukose

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