SBIW Steels Pvt. Ltd. & Anr. Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
Summary: The Customs, Excise and Service Tax Appellate Tribunal, Kolkata, allowed appeals filed by M/s SBIW Steels Pvt. Ltd. and its director Shri Rajesh Goel against the Commissioner of CGST and Central Excise, Durgapur. The company manufactured TMT bars as a conversion agent for Steel Authority of India Limited (SAIL) under a wet-leasing agreement dated 16 June 2011. According to the agreement, its entire manufacturing capacity was committed to SAIL, which supplied billets and monitored manufacturing, quality control and movement of goods through its representatives. The Department alleged clandestine clearances based on records recovered during its visit on 14 August 2014. The adjudicating authority confirmed a duty demand with an equivalent penalty on the company and imposed a separate penalty of ₹3 crore on the director. The appeals arose from Order-in-Original No. DRG-EXCUS-000-COM-032-16-17 dated 7 March 2017.
During the investigation, officers recovered notebooks and loose papers from Shri Joydev Karmakar, who worked under Shri Mukesh Chowdhury, a loading and unloading contractor. Some entries in these documents corresponded to recorded transactions of the company, while others did not. The Revenue treated the unmatched entries as evidence of unaccounted production and clearance. The appellants disputed this inference, pointing out that the records were maintained by a third party for loading and unloading activities, including movements within the factory and activities involving other concerns. They also asserted that the officers had not verified stock, identified buyers, examined vehicle owners or drivers, or established procurement of additional inputs. A show cause notice dated 6 May 2016 relied on calculation annexures C1 to C6; the appellants complained that the supporting records were not supplied despite requests. They further argued that the demand was time-barred and that the deposit of ₹50 lakh during investigation was not an admission of wrongdoing.
The Tribunal held that the demand rested essentially on third-party records whose entries had not been independently corroborated. Referring to Commissioner of Central Excise, Indore v. Prag Pentachem Pvt. Ltd., CBI v. V.C. Shukla, Raj Petroleum Products v. Commissioner of Central Excise, Mumbai-I, and Commissioner of Central Excise and Service Tax, Raipur v. P.D. Industries Pvt. Ltd., it emphasised that loose papers, private notebooks and records maintained by agents or transporters cannot, by themselves, establish clandestine manufacture and removal. The Department had not investigated the contractor Shri Mukesh Chowdhury, tested the vehicle details, identified purchasers, traced sale proceeds, verified excess electricity consumption or established additional raw-material procurement. The Tribunal also noted the absence of any determination of production capacity and the lack of corroborative evidence connecting the disputed entries to actual unaccounted manufacture by SBIW Steels.
The Tribunal separately considered the statement of Shri Joydev Karmakar. It found that the statement could not be relied upon without examining its maker and affording the appellants the opportunity of cross-examination in accordance with Section 9D of the Central Excise Act, 1944. The Tribunal relied on the Punjab and Haryana High Court’s decision in Jindal Drugs Pvt. Ltd. v. Union of India, which explained that, unless a statutory exception applies, the adjudicating authority must first examine the witness and determine whether the statement is admissible before relying on it. The request for cross-examination had been rejected during adjudication. Consequently, the statement could not substantiate the allegations of clandestine clearance. The Tribunal’s reasoning distinguished the Department’s reliance on statements from evidence properly admitted under the statutory procedure.
In its final findings, the Tribunal concluded that neither the third-party documents nor the untested statements established clandestine manufacture or removal. It specifically recorded that production capacity had not been ascertained and no meaningful inquiry had been made from buyers, transporters or suppliers to verify the records attributed to Shri Joydev Karmakar. Accordingly, it held that the charge was unsustainable, set aside the impugned adjudication order and consequentially quashed the demand and penalties against both appellants, including the penalty imposed on director Shri Rajesh Goel. Both appeals were allowed with consequential relief, if any. The decision was pronounced on 25 May 2026 by Shri Ashok Jindal, Member (Judicial), and Shri K. Anpazhakan, Member (Technical), in Final Order Nos. 75642–75643/2026.
Cases Discussed
- Commissioner of Central Excise, Indore v. Prag Pentachem Pvt. Ltd., 2018 (360) ELT 1025 (Tri.-Del.)
- CBI v. V.C. Shukla, (1998) 3 SCC 410
- Jindal Drugs Pvt. Ltd. v. Union of India, 2016 (340) ELT 67 (P&H)
- Commissioner of Central Excise & Service Tax, Raipur v. P.D. Industries Pvt. Ltd., 2016 (340) ELT 249 (Tri.-Delhi)
- Raj Petroleum Products v. Commissioner of Central Excise, Mumbai-I, 2005 (192) ELT 806 (Tri.-Mumbai)
- J.K. Cigarettes Ltd. v. Commissioner of Central Excise, 2009 (242) ELT 189 (Del.)
- TGL Poshak Corporation v. Commissioner of Central Excise, Hyderabad, 2002 (140) ELT 187 (Tri.-Chennai)
- Rhino Rubbers Pvt. Ltd., 1996 (85) ELT 260 (Tribunal)
- Arya Abhushan Bhandar v. Union of India, 2002 (143) ELT 25 (SC)
- Swadeshi Polytex v. Collector, 2000 (122) ELT 641 (SC)
- Durga Trading Co. v. Commissioner, 2002 (148) ELT 967
- Brims Products v. Commissioner of Central Excise, 2001 (130) ELT 719
- Raj Sundeep Co. Gian Singh v. Collector of Central Excise & Customs, 2003 (162) ELT 1028
- CCE v. Dashmesh, 2001 (130) ELT 658
- R.P. Industries v. Collector, 1996 (82) ELT 129
- Bussa Overseas Properties Ltd. v. Commissioner of Customs, 2001 (137) ELT 637 (T.)
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellants are in appeal against the impugned order wherein demand of duty has been confirmed against the appellants and an equivalent amount of penalty has also been imposed on the appellant-company and a penalty of Rs.3.00 Crores has been imposed on the Director of the appellant-company.
2. The facts of the case are that the appellant was engaged in the manufacture of TMT Bars as a conversion agent of Steel Authority of India in terms of the agreement entered into with the SAIL on 16.06.2011. In terms of the said agreement for wet-leasing, the appellant had offered their total capacity for undertaking production of goods for SAIL and the appellant was not entitled for producing any goods for any other persons. The said agreement also provides for supplying the quantity of materials after allowing percentage of material loss. The said contract also provides that the activities of the appellant would be monitored by the representative of SAIL. In respect of scrap, the appellant was entitled for clearing the same on payment of duty. Since the appellant had offered the total mill capacity of M/s. SAIL, they would not produce and sale of the said product under its banner or for any other buyers agency. As per te said agreement, M/s. SAIL was supplying billets to the appellant and the appellant was manufacturing TMT Bars in their factory and clearing the finished goods as TMT Bar as per the direction of M/s. SAIL or to any other depots of SAIL as per direction of SAIL. The representatives of SAIL was also posted at the factory of the appellant to look after the manufacturing activity and/or quality control aspect and/or inward & outward movement of raw- materials and finished goods as well as consumable properties. There was no scope for manufacture of any unaccounted goods and clearance thereof to any other person in view of the said agreement and the contract. No dispute was raised by the department at any point of time till the officers of the department visited their factory on 14.08.2014.
2.1 The officers of the department visited on 14.08.2014 the appellant factory premises, office premises and the premises of Shri Joydev Karmakar working under loading and unloading contractor and recovered some note books and loose documents. The officers did not undertake stock verification. There was also no allegation from SAIL in respect of unauthorized manufacture and clearance of some quantities of goods to any other buyers. The representatives of RITES on behalf of M/s. SAIL also did not make any complaint. There was no evidence in respect of procurement of inputs from any other sources, no buyer was identified, no statement was taken from any buyer or transporter or driver or owner of vehicle wholly relying upon the entries in some note books or in loose papers containing rough entries of vehicle numbers, quantity etc. Clandestine clearance of goods have been inferred and the appellant was made to deposit an amount of Rs.50 lakh on 14.08.2014 itself, wholly on the basis of the entries in the third party documents i.e. the note books maintained by Shri Joydev Karmakar, a labour/employee of loading and unloading contractor. During the curse of inspection, the statement of Shri Joydev Karmakar was recorded on 14.08.2014 & 20.10.2014. In his statement, he stated that he was maintaining the accounts of loading and unloading as per order of one Shri Mukesh Chowdhury and on the basis of which, Mukesh Chowdhury was getting payment from the appellant. The appellant also procured billet not only from SAIL, but also from other companies. The statement of Sawarmal Agarwal was also recorded on 14.08.2014 showing him the statement of Shri Joydev Karmakar when he stated that he was working as Manager (Administration) since 2012 and on seeing the statement of Shri Joydev Karmakar, he stated that he was engaged in providing of loading and unloading services. The entries in the note books are in fact the details relating to loading and unloading of the goods. The statement of Rajesh Kumar Goel, Director of the appellant was also recorded on 15.02.2016 who in his statement amply clarified the agreement with SAIL and their scope of activities. He clearly stated that Shri Joydev Karmakar was not an employee of the appellant. He was worked under Shri Mukesh Chowdhury, he looked after loading and unloading of their finished goods. He did not know what Shri Joydev Karmakar had written in the note book and he did not offer any comment on the said document and he has no knowledge about the said entries in the note book. The statement of Shri Saibal Saha was also recorded. Shri Saibal Saha was the accountant of the appellant company and was looking after the accounts of the company. He also explained the activities under the agreement with M/s. SAIL. He was made to state about matching of some entries in the note book of Shri Joydev Karmakar with some statutory documents and in some cases he was made to state that Central Excise invoices were not issued against some clearances in comparison to entries in the note book.
2.2 The appellant was issued a Show Cause Notice dated 06.05.2016 demanding Central Excise duty on the basis of the calculation as contained in Annexure-C based on Annexure-C1 to C6. There was no document to verify the said entries and the rest documents were not supplied to the appellant and on the basis of said calculation/typed statements, demand has been raised.
2.3 The appellant submitted their reply to the said Show Cause Notice vide their letter dated 22.12.2016 denying and disputing the allegations contained in the Show Cause Notice stating inter alia that the appellant was undertaking the activities of SAIL on the basis of wet-leasing agreement offering entire capacity to factory to SAIL. The appellant was not entitled for manufacturing any other goods for any other persons. The appellant was taking credit on billets on sale and manufacturing TMT Bar and clearing the same on payment of duty to SAIL and their authorized depot as per direction of the SAIL. The third party documents and statements cannot be relied upon. No verification of stock was made. Statement of Shri Mukesh Chowdhury was not recorded. The statement of any labourer or looking after the excise matter was also not recorded. The cross-examination of Shri Joydev Karmakar and other persons were prayed for. The relied upon documents forming the basis of the Annexure-C1 to C6 was requested, but the same was not supplied. There were some entries in the note books or loose slips recovered from Shri Joydev Karmakar, which was tallying with the records of the appellant, which were properly explained by stating that some trading activities of their sister concerns were relating to some entries. There were shifting of material within the factory, which was also reflected in the loading and unloading entries. Some documents recovered from the premises of M/s. Steelex Electrocast Pvt. Ltd. and the statement of Shri Anil Agarwal was recorded. Those are again third party documents and statements, which cannot be relied upon. Apart from some documents and statements of third party, there is no other evidence/no other independent material particulars to corroborate any clearance without payment of duty. The demand was also barred by limitation. Suppression cannot be alleged since the supply was being made to SAIL, a Govt. of India Undertaking and there was no evidence of selling the goods of any other persons. The officers of the department visited on 14.08.2014 and seized the documents, but the Show Cause Notice was issued on 06.05.2016, which is barred by limitation.
2.4 The appellant was issued with an order in original dated 07.03.2017, the Ld. Adjudicating Authority confirmed the demand, charged interest and imposed penalty.
2.5 Against the said order, the appellants are before us.
3. The ld.Counsel for the appellants submits that the order passed by the Ld. Adjudicating Authority cannot be maintainable in law for the following reasons that –
(i) The Order passed by the Ld. Adjudicating Authority without considering submission and the decision cited seriously affected the decision making process resulting gross violation of the principles of natural justice. The Ld. Commissioner did not consider that no stock verification was made by the visiting officers and the fact of such stock verification, the SAIL did not raise any complaint in respect of unaccounted manufacture and clearance of the goods. The proceeding is based on incomplete investigation. There is no documentary evidence in respect of procurement of huge quantity of inputs from any other sources. No buyer has been identified. No statement from any buyer/transporter/driver or owner of the vehicle was recorded. There is no evidence in respect of huge consumption of electricity, flow of fund and other relevant evidence. In other words, no investigation was made apart from relying on some entries in the note books and/or loose papers containing rough entries recovered from the premises of Shri Joydev Karmakar, a labour/employee of Shri Mukesh Chowdhury who was the loading and unloading contractor. Specific request was made for providing supporting documents on the basis of which the tabulation has been made, but the same was not given. Statement of Shri Mukesh Chowdhury was not recorded on whose instruction the employee Shri Joydev Karmakar was maintaining note books regarding loading and unloading of goods for different companies. Specific submission was also made that third party statements and documents recovered from the premises of Shri Joydev Karmakar cannot be relied upon and/or cannot be made the bass for raising the demand. Some entries in the documents recovered from the office of the appellant were relating to the trading activities, which was not considered. Tallying of some entries of note books of Shri Joydev Karmakar with some entries in the documents of the appellant regarding the movement of the goods cannot make the document recovered from Shri Joydev Karmakar as authentic. The demand has been raised on the basis of typed statements without disposing the best document allegedly recovered from the premises of Shri Joydev Karmakar cannot be maintainable in law. Annexure-C1 to C6 appears to be merely typed statements and not supported by any statement.
(ii) The Ld. Adjudicating Authority did not consider all those points. The entire demand is based upon the documents recovered from the premises of Shri Joydev Karmakar. He was the employee of Shri Mukesh Chowdhury, engaged in loading and unloading of the goods of different companies including the appellant. No verification was made from Shri Mukesh Chowdhury and no statement was recorded, no investigation was made in respect of vehicle numbers mentioned in the calculation chart. The sample copies of the seized document has been disclosed which will speak for itself and does not in any way lead to make any inference about clearance of the goods for the appellant without payment of duty. Apart from the statement of some persons including Shri Joydev Karmakar, a third party, there is no other evidence and/or corroborative evidence for clearance of the goods without payment of duty.
(iii) The appellant wanted cross-examination of the persons whose statements have been relied upon including the statement of Shri Joydev Karmakar, but the Ld. Adjudicating Authority rejected such request on the plea that the said cross- examination may further complicate the issue. The Ld. Adjudicating Authority even did not bother to comply with the statutory mandate as contained in Section 9D of the Central Excise Act, 1944 and as a result, statements cannot be relevant and cannot be accepted.
(iv) The main and sole contention of the appellant that the third party documents cannot be the basis for raising the demand apart from the said third party documents, there is no other evidence and/or corroborative evidence to establish the clearance of the goods without payment of duty and demand of such basis cannot be maintainable in law. The Ld. Adjudicating Authority did not consider the said vital points, which goes to the route of this case.
(v) It was further submitted that the Ld. Commissioner did not consider and/or deny that the appellant had offered their total Mill Capacity to SAIL for the manufacture of the goods of SAIL and was not permitted to manufacture the goods for any other persons. The appellant cannot undertake any other manufacturing and supply the same to any other persons. They are only entitled for manufacturing the goods for SAIL and supplied the same to the depot or any other places at the instruction of SAIL. SAIL is a Government of India Undertaking. There cannot be any unauthorized contractor or removal of the goods during the currency o the wet-lease agreement.
(vi) There is not a single evidence of unauthorized manufacture and removal of goods without payment of duty supported by corroborative evidence.
(vii) The Ld. Commissioner did not consider that Revenue has to first prove the manufacture of goods for holding the charge of clandestine removal and the manufacture of goods required procurement of huge raw-materials and other corroborative evidence is required to be given, which evidence is totally lacking in this case.
(viii) Mere deposit during investigation is not amounting to acceptance of the allegation, law is well settled in this regard. The demand is also barred by limitation. There was no suppression of clandestine manufacture and removal of goods without payment of duty. There is no complaint from M/s. SAIL in respect of undertaking any unauthorized manufacture and removal of goods. The appellant heavily relied upon Ground No. (VIII) in the ‘GROUNDS OF APPEAL’ to demolish the allegation of any clandestine manufacture and removal of goods without payment of duty. The proceeding is also void ab-initio since it was initiated on the basis of a conclusive Show Cause Notice and on the basis of typed statement/calculation, the loose slips/note books disclosed in this proceeding does not make any reference to show that they were related to the appellant.
(ix) The order passed by the Ld. Adjudicating Authority cannot be maintainable in law.
(x) Since the demand is not maintainable either on merit or on point of limitation, the question of charging interest and imposition of penalty does not and cannot arise.
(xi) Regarding imposition of penalty on the Director, Shri Rajesh Kumar Goel, the appellant submits that condition precedent for imposing penalty under Rule 26 of the Central Excise Rules, 2002 has not been satisfied in this regard. The finding of the Ld. Commissioner as contained in para 7.40 does not show the reasons so the legally tenable reason for imposition of penalty under Rule 26(1) of the Central Excise Rules, 2002. The finding of the Ld. adjudicating authority as contained in para 7.40 is not sufficient for imposition of penalty on the Director. In support of his contention, he relies on the following decisions: Prag Pentachem Pvt. Ltd.: 2018 (360) ELT 1025 (Tri-Del.) CBI –vs- V. C. Shukla: 1998 (3) SCC 410 Raj Petroleum Products: 2005 (192) ELT 806 (Tri-Mum) Mayfair Industries: 2016 (338) ELT 594 (Tri-Del) Vishnu & Co. Pvt. Ltd.: 2016 (332) ELT 793 (Tri-Del) P.D. Industries Pvt. Ltd.: 2016 (340) ELT 249 (Para-5) Lords Chemicals Ltd.: 2009 (245) ELT 695 (Tri-Del), which was confirmed by the Hon’ble High Court, Calcutta as – 2010 (258) ELT 48 (Cal.) Rinko Alloys Pvt. Ltd.: 2007 (212) ELT 529 (Tri-Mum, Para 3) Sakeen Alloys Pvt. Ltd.: 2013 (296)ELT 392 (Tri-Ahmd) Sakeen Alloys Pvt. Ltd.: 2014 (308) ELT 655 (Guj.) Sakeen Alloys Pvt. Ltd.: 2015 (319)ELT A117 (S.C.) Capital Ispat Ltd.: 2016 (340) ELT 369 Triveni Engineering & Industries Ltd.: 2016 (344) ELT 595 (All.) Jindal Drugs: 2016 (340) ELT 67 (P&H) Perfect Boxes Ltd.: 2017 (348) ELT 297 Globe Rexine Pvt.Ltd.: 2006 (203) ELT 632 (Tri-Chen) Kundan Rice Mills Ltd.: 2008 (232) ELT 14 ( P & H) [Para 18]
4. The ld.A.R. for the Revenue has justified the impugned order.
5. We have gone through the submissions made from both the sides and in the impugned order.
6. We find that the appellant is a manufacturer of TMT Bars for Steel Authority of India (SAIL). To that effect, the appellant has entered an agreement with SAIL and all the production done by the appellant has to be on behalf of the SAIL. These facts are not in dispute. The dispute raised by the Revenue after visit of their factory on 14.08.2014 wherein a Diary has been maintained by Shri Joydev Karmakar, who was an employee under a contractor and he was working under loading and unloading, maintaining records, movement of goods from the premises of the appellant and on the basis of that records, it is revealed that the entries made in those books are partly tallied with the transaction of the appellant and partly are not found in the appellant’s records. Therefore, it is alleged that the appellant has engaged in the activity of clandestinely removed of the goods.
7. In fact, the whole of the case has been made out by the Revenue against the appellant on the basis of third party evidence. Therefore, the issue arose in respect of third party documents, can be relied upon or not. The said issue has been examined by this Tribunal in the case of Commissioner of Central Excise, Indore Vs. Prag Pentachem Pvt. Ltd. reported in 2018 (360) ELT 1025 (Tri.-Del.), therein this Tribunal has observed as under:
“20. The case of the Revenue for denial of credit is on the basis of written slips/laptop seized from the residence of Shri Kirti Kala, cashier of M/s. SOL, statement of Shri Kirti Kala, statement of Shri Mukesh Sangal, Director of M/s. SOL, statement of Shri Paras Patidar, Marketing Manager of M/s. SOL and the statement of transporters who stated that they have not transported the goods in question. In the case of M/s. Prag Pentachem Pvt. Ltd., the statement of Kami Singh Kothari, director was also relied upon by the Revenue. Therefore, to deal with the cases, the evidence is to be examined as under:-
21. The documents received from the custody of Shri Kirti Kala and a laptop seized from him. Shri Kirti Kala was not maintaining the records in the regular course of business but these records were his personal records and it became third party evidence. Moreover, on examination of the documents, it is revealed that the amount of cash shown in those documents pertained to whom and to whom the cash payment was received and the said entries have not been corroborated by any independent tangible evidence. Therefore, the said evidence cannot be relied upon as admissible piece of evidence being third party record in view of the case of CBI v. V.C. Shukla wherein the Apex Court in paras 34 and 39 has observed as under: –
34. The rationale behind admissibility of parties‟ books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (Wigmore on evidence 1546). Since, however, an element of self interest and partisanship of the entrant to make a person – behind whose back and without whose knowledge the entry is made – liable cannot be rules out the additional safeguard of insistence upon other independent evidence to fasten him with such liability, has been provided for in Section 34 by incorporating the words „such statements shall not alone be sufficient to charge any person with liability‟.
39. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the [other] books and loose sheets (which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers‟ correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (Sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, Section 34 cannot at all be pressed into service against him.
22. Similar view was taken in the case of TGL Poshak Corporation v. CCE, Hyderabad – 2002 (140) E.L.T. 187 (Tri.- Chennai) wherein this Tribunal in para 6 has observed as under:-
6. We have carefully considered the submission and perused the impugned order. Insofar as the assessee‟s appeal is concerned, we notice from the extracted portion of the Commissioner‟s order that Revenue is solely relying on the exercise note books mainly balance sheets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regard to removal of Vanaspati based on the inputs maintained. The Tribunal went in great detail and have clearly laid down that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of the final product demands cannot be confirmed based on some note books. A similar view was expressed by the Tribunal in the other judgments noted supra. The citations placed would directly apply to the facts of this case.
Hence, following the ratio of the cited judgments, the assessee‟s appeal is allowed.
23. In the case of Rhino Rubbers Pvt. Ltd. [1996 (85) E.L.T. 260 (Tribunal)] (supra) again this Tribunal has held and observed as under:
“Goods not sufficient to prove clandestine manufacture and removal to have been purchased by one Mr. Augustin on behalf of the manufacturer – Such person not traced by the authorities nor his statement recorded – Manufacturer disowning the purchase of the raw material from the third party- Third party‟s records also showing names of the other purchasers but some of such purchasers of carbon black. HELD: It is not safe to rely only on the third party‟s records evidence when no direct links of the transaction established. “Other parameters like electricity consumption etc. should have been considered before demanding duty on the alleged clandestine manufacturer and removal of goods” Order demanding duty and imposing penalty set aside and case remanded for de novo adjudication.”
24. Therefore, third party evidence by way of documents/laptop printout seized recovered from the custody of Shri Kirti Kala are not admissible piece of evidence to deny the credit. Further, I find that the statements of Shri Kirti Kala, Paras Patidar and Shri Mukesh Sangla were also relied upon but these statements have not been corroborated by any tangible evidence. I further find that during the course of investigation various statutory records resumed by the investigating team and the same have not been discarded by the authorities. Therefore, the said records are admissible evidence as per Section 36A of the Central Excise Act, 1944 wherein it has been stated that any documents produced by any person or has been seized from the control of the said person under this Act or any other law. Unless contrary is proved by such person, it is presumed that the content of the said documents true. In this case, the Revenue has not been able to prove any contrary to the seized documents recovered from the custody of the respondent. Therefore, the same are admissible evidence in favour of the respondent as held by this Tribunal in the case of Rhino Rubber (supra). Further, I find that the Revenue is heavily relied upon the statement of Shri Karni Singh Kothari, director of the respondent No. 1 i.e. M/s. Prag Pentachem to say that he has admitted that they have not received any goods from M/s. SOL and procured the goods from open market in Delhi without any cover of invoice to cover those purchases they have obtained invoices from M/s. SOL.
25. On examination of that statement, although the statement retracted by Shri Karni Singh Kothari, this statement is required to be examined independently. On independent examination of the said statement, I find that the goods/inputs were not available in the Indore and the respondent have procured the inputs from the open market in Delhi without cover of invoices. No prudent manufacturer shall procure inputs from Delhi without cover of invoice to cover those purchases shall procure the invoices from Indore. Possibly, the Revenue has not made any enquiry from Delhi Market in respect of statement of Shri Karni Singh Kothari to ascertain the truth. Moreover, no statement has been recorded from the transporter in order to ascertain that the goods have been procured without cover of invoice from the Delhi market. The statement has not been supported with tangible evidence, the same cannot be relied upon in view of the decision of Hon‟ble Allahabad High Court in Vikram Cement Pvt. Ltd. Another evidence relied upon by the Revenue is the statement of the transporter. Shri Vishal Agarwal, proprietor M/s. BGFC and authorised signatory of M/s. BBTC has stated that they have issued LRs to M/s. SOL by charging Rs. 100 for each bilty and on the statement of 3 vehicle owners and out of 32, who refused to have transported the goods. From the statement of Shri Vishal Agarwal, it is clear that he has issued bilty only when talked to the driver of vehicle for which he charged Rs. 100/-. Therefore, the statement has been misinterpreted by the investigating authority to allege that the transporter of BGFC and BBTC. In fact no statement of the driver have been recorded to ascertain the truth whether the vehicle in question were involved in transporting the goods or not and no other evidence has been placed on record to ascertain the same. The Revenue has also not come with tangible evidence that the respondent have procured the goods in question from M/s. SOL and other associates. Further, the same investigation conducted in the case of M/s. Narmada Extrusion Ltd. wherein the same set of evidences has been relied on and the Commissioner (Appeals) have set aside the demand of duty and imposition of penalty vide Order-in-Original No. IND/CEX/OOO/APP/80 & 81/2013, dated 21-2-2013 holding that there are no sufficient ground to confirm the demand.and the said order has been accepted by the Revenue. No appeal has been filed against the said order.
26. In the case of Rajshri Plastwood, there is no incriminating statement by the respondent, therefore, this case is on better footing and the observations of the case of Prag Pentachem Pvt. Ltd. are squarely applicable to this case and are not repeated for the sake of brevity. In the circumstances, I am of the considered view that the Revenue has not concluded the proper investigation to ascertain the truth, moreover, have relied upon third party documents/evidence which cannot be an evidence to deny credit. Therefore, I hold that the respondent has correctly taken the credit and consequently, the respondents are not required to reverse Cenvat credit and no penalty is imposable on the respondents.
27. To conclude, I do not find any infirmity in the impugned orders, the same are upheld and the appeals filed by the Revenue are dismissed.”
8. Further, in the case of Central Bureau of Investigation (CBI) Vs.V.C. Shukla & Others reported in (1998) 3 Supreme Court Cases 410, the Hon’ble Apex Court has observed as under: “39. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without Independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets (which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the former’s correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of Independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far as they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (Sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, Section 34 cannot at all be pressed into service against him”.
9. Further, in the case of Raj Petroleum Products Vs. Commissioner of Central Excise, Mumbai I reported in 2005 (192) ELT 806 (Tri.- Mumbai), this Tribunal has observed as under: “
2.4 It is found –
This demand is (A) part of the demand is based on the (i) split- up into 3 parts. The first Annexure-A1 of the Show Cause Notice. Which is a list of in voices of sales by JIT which is a partnership firm. The said trading firm i.e., JIT also has an Office in the same compound with common gate where the factory of the Appellants, namely, M/s. Raj Petroleum Products Ltd. (RPM) is also situate.
(ii) The sales of petroleum speciality oils by JIT under invoices mentioned in Annexure-A1 to the notice have been treated as the goods allegedly manufactured and removed without payment of duty by RPM. Annexure -A1 to the notice cannot be relied for the following reasons:
(iii) The Commissioner has held JIT to be an independent entity and this finding of facts have not been challenged. JIT is not a party to the show cause notice and therefore RPM cannot be called upon to explain and be responsible for such 3rd party documents clearances etc. Any allegation about non-maintenance or improper maintenance of correct accounts by JIT cannot lead to the conclusion that RPM manufactured and removed those goods without payment of duty.
(iv) The allegations that RPM manufactured and removed goods without payment of duty in the garb of trading activity of JIT is sought to be supported by two private records. These are as under:
(a) Register
(b) Lab Register.
(v) As regards, the gate register, the same is maintained by an employee of the Security Agency as per statement of Harish N. Singh (relied upon). It is a record maintained, by third party, does not belong to RPM, this gate register is common for all receipts and discharges of goods from and at 124, G.D. Ambedkar Marg, the common compound area in which premises the existence of two independent entities conducting business has been established, ipso facto cannot lead to a conclusion that all removals shown therein are of goods of proprietary interest of RPM. Reliance in this connection, placed on the statutory registrations of JIT with different authorities in respect of Compound at 124, G.D. Ambedkar Marg, rent receipts. Bank record and insurance company policy to show that JIT was actually conducting business and/or operating out of 124, G.D. Ambedkar Marg (were extensively relied upon in reply to show cause notice. Nothing is on record, why the said clearances as taken from Gate Register could not be of JIT & are necessarily of RPM, would be a presumption & assumption. Submission that all goods received at or discharged from common Gate of Compound at 124, G.D. Ambedkar Marg, cannot be attributed to RPM. Therefore demand as made cannot be upheld. Transaction of genuine trading transactions therefore relating to JIT and removed would shield RP-M from payment of excise duty. It is surprising why JIT were not given a notice and examined by the department. Further the said Gate register, is available only for period January 1998 to November 1998. The same cannot be made the basis for allegation for entire period of demand in the Show Cause Notice.
(vi) As regards the lab register, it, as been exhibited before us, shows samples drawn from various tankers/consignments, to have been tested at the laboratory of RPM. It also shows that samples of various oils that have been mixed/blended together and the technical specifications of these samples have been recorded in the lab register. The lab register also records samples of third parties which are received and tested in the lab of RPM. That itself would be sufficient to shatter the base & it to be a ground, to assume that all the samples tested represent the quantity manufactured by RPM, & sold in the name of JIT without payment of excise duty. As is the case tried to be made. This register is not proved to be exclusive production test records of RP-M products. Manufacture of the excisable goods by RPM cannot be based relying upon this register.
(vii) RPM has in the reply to the show cause notice brought out the discrepancies in Annexure-A1, to the show cause notice. A/c accepted and bona fide and genuine transactions of RPM as well as JIT have also not been recorded in the Gate Register. There are other sales of JIT over and above the sales shown in Annexure-A1 of identical/similar goods which are not being challenged. Reasons to select a few of them and ascribe the same to unaccounted production of RPM cannot be assumed.
(viii) When, JIT has been purchasing raw materials with the address at 124, G.D. Ambedkar Marg and its independent existence is not under challenge, it is a trading concern and the activities of JIT are totally independent it has to be held that all receipts/removals from gate of premiers as 124, G.D. Ambedkar Marg; Mumbai had nothing to do with quantum of manufacture of or and receipt disposal or goods of RPM.
(ix) The notice seeks and subjects to rely on the statements of the 3 Directors of RPM along with the statements of the Production Supervisor (Anil Lad) and Chemists (Prakash Suryavanshi) as also the Manager (Dungar C. Chothani alias Kakubhai). These statements cannot be read in isolation and when read in the context of the Gate Register and Lab Register as found above are not relevant for establishing clandestine removal. Force is found in this submission. As the documentary evidence does not establish clandestine removal, the oral statements based thereon, which travel beyond the documentary evidence have to be viewed with suspicion and in the event of a conflict, the documentary evidence should prevail; thereby when documentary evidence does not establish clandestine removal, the statements based thereon cannot prove [see R.P. Industries v. Collector, 1996 (82) E.L.T. 129]. Besides, these statements are qualified and conditional. The statements have to be read together and as a whole are not in part and pieces, when so read, the statements do not establish clandestine removal.
(x) The second part of the demand related to and on the documents seized from the premises of transporters as at Annexure – A2 to A4 of the notices. This Tribunal in the following cases held that transporters records are not relevant to prove clandestine removal.
(A) Durga Trading Co. v. Commissioner [2002 (148) E.L.T. 967]
(B) Brims Products v. Commissioner of Central Excise [2001(130) E.L.T. 719]
(C) Raj Sundeep Co. Gian Singh v. Collector of Central Excise & Customs [2003 (162) E.L.T. 1028 (Tribunal) = 1999 (31) RLT 324]
Is the submission made before us in absence of any material to the contrary, the same view has to upheld.
In CCE v. Dashmesh [2001 (130) E.L.T. 658] this Tribunal has held that octroi receipt cannot the basis for alleging clandestine removal. The records obtained form Surat Municipal Corporation are therefore found to be not useful to establish the charges on stand alone basis.”
10. Further, in the case of Commissioner of Central Excise & Service Tax, Raipur Vs. P.D.Industries Pvt. Ltd. reported in 2016 (340) ELT 249 (Tri.-Delhi), again this Tribunal has observed as under:
“5.The Bench raised a query as to what is the marking of „B‟ and „R‟ in the records of the Commission Agent, the learned Counsel explained that, in cases where the bills are issued and there was no dispute between the manufacturer and buyer, the agent would note it as „B‟. Sometimes goods are rejected or some dispute arises, and bills/invoices in such cases are not issued. He used to note these as „R‟. The records reveal that the whole case of clandestine removal is based merely on the entries found in the books of commission agent and transporters. They were acting as agent and transporter not only for the respondent but also for other manufacturers. The department has not conducted any physical verification of stock of finished goods or raw material. The allegation is not supported by data of purchase of excess raw materials or consumption of electricity during the relevant period. The details of payment and flow of cash from the buyer to respondent is not established by any evidence. So also there is no proof like parallel invoice, or other documents maintained by manufacturer corroborating the data collected from such commission agent and transporters. No investigation is conducted whether respondent actually manufactured such large quantities during the relevant time. If Revenue wants to rely upon the entries of document seized from the premises of third party, it is for them to prove the genuineness of those entries with the respondent. The proceedings and allegation of clandestine removal cannot be based on surmises and conjectures or mere suspicions. The appellant has not been able to demonstrate anything to disturb the findings made in the impugned order.” In view of the above, we hold that the demand raised against the appellant on the basis of the documents recovered from the possession of Shri Joydev Karmakar, is not sustainable.
11. We further take note of the fact that in this case, no statement of the transporter, Shri Mukesh Chowdhury, has been recorded, who has assigned the work to Shri Joydev Karmakar. In that circumstances, the statement made by Shri Joydev Karmakar, is not a relied upon piece of evidence in the absence of examination in Chief and by not providing any cross-examination to the appellant as held by the Hon’ble High Court of Punjab & Haryana in the case of Jindal Drugs Pvt. Ltd. Vs. Union of India reported in 2016 (340) ELT 67 (P & H), wherein the Hon’ble Punjab & Haryana High Court has observed as under:
“6. The present proceedings essentially emanated from Show Cause Notice No. C.No.V(33)84/HQ/Adj/CE/J&K/JDL/12/1275, dated 5-11-2012 issued to the petitioners by the Commissioner under Section 11A of the Act alleging that the petitioners had without manufacturing any finished products in its premises namely premises in Jammu, wrongly taken refund of ` 48,10,79,820/- during the period November, 2007 to March, 2010 proposing to demand a recovery thereof along with interest and penalty and requiring the petitioners to show cause thereagainst.
7.Petitioners filed reply to the show cause notice and attended the personal hearing before respondent no.2. It is contended by the petitioners that the 2nd respondent denied the opportunity for cross-examination of all the witnesses sought by the petitioners except Shri S.C. Tripathi, Accountant of M/s. Gupta Suppliers Company.
8. In view of the fact that the case of the petitioners is essentially premised on Section 9D of the Central Excise Act, 1944, it would be appropriate to reproduce the said provision, in extenso, thus:
Relevancy of statements under certain circumstances. “9D. A statement made and signed by a person before any Central Excise – (1) Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, –
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
The provision of sub-section (1) shall, so far as may be, (2) apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.”
9. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein.
10. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the
provisions of sub-section (1) thereof would extend to adjudication proceedings as well.
There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution.
11. As already noticed hereinabove, sub-section (1) of Section 9D sets out the circumstances in which a statement, made and signed before a gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1).
12. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts.
13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof.
14.Clause (a) of Section 9D(1) refers to the following circumstances:
(i) when the person who made the statement is dead,
(ii) when the person who made the statement cannot be found,
(iii) when the person who made the statement is incapable of giving evidence,
(iv) when the person who made the statement is kept out of the way by the adverse party, and
(v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense.
15.Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self-evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners have also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 2183/1994, dated 3-1-1995 wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby.
16.If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and
(ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
17.There is no justification for jettisoning this procedure, statutorily prescribed by plenary Parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise Officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word “shall” in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory.
18.The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned.
19.Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice.
20.In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination.
21.It is only, therefore, –
(i) after the person whose statement has already been recorded before a Gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and
(ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise.
22.Clearly, if this procedure, which is statutorily prescribed by plenary Parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof.
23.Reliance may also usefully be placed on Para 16 of the judgment of the Allahabad High Court in C.C.E. v. Parmarth Iron Pvt Ltd., 2010 (260) E.L.T. 514 (All.), which, too, unequivocally expound the law thus:
“If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence.”
24.That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd., 2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v C.C., 2001 (137) E.L.T. 637 (T).
25.In the light of the above, respondent no. 2 is directed to adjudicate the show cause notice issued to the writ petitioners by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial authorities in this regard, including the principles of natural justice, in the following manner:
(i) In the event that the Revenue intends to rely on any of the statements, recorded under Section 14 of the Act and referred to in the show cause notices issued to Ambika and Jay Ambey, it would be incumbent on the Revenue to apply to Respondent No. 2 to summon the makers of the said statements, so that the Revenue would examine them in chief, before the adjudicating authority, i.e., before Respondent No. 2.
(ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e., to Ambika and Jay Ambey in this case.
(iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examined-in-chief before the adjudicating authority, i.e., before Respondent No. 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No. 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in the show cause notice.
(iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross- examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements. If at all authority is required for this proposition, reference may be made to the decisions of the Hon‟ble Supreme Court in Arya Abhushan Bhandar v. U.O.I., 2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex v. Collector, 2000 (122) E.L.T. 641 (S.C.).”
Therefore, the statements relied by the adjudicating authority while adjudication are not admissible evidence to allege clandestine removal of goods.
12. We further take note of the fact that no production capacity has been ascertained. Moreover, no effort has been made out by the buyers, transporters or suppliers of the goods in question to verify the veracity of records maintained by Shri Joydev Karmakar. In the absence of these evidences (which are very much required to establish the charge of clandestine removal of goods), the charge of clandestine removal of goods, is not sustainable.
13. In view of this, we do not find any merit in the impugned order. Accordingly, the impugned order is set aside. Consequently, the demand of penalties raised against the appellants is also set aside.
14. In the result, the appeals filed by the appellants are allowed with consequential relief, if any.
(Pronounced in the open court on 25.05.2026)
