Raj Kumar Gupta Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
CESTAT Kolkata held that charge of clandestine removal of goods without sufficient, cogent and tangible evidence is unsustainable. In the present case, the Revenue has not brought in any evidence to corroborate the allegation that the Appellant were the actual manufacturers of the cigarettes. Accordingly, demand unsustainable.
Facts- The Appellant states that ATPL is registered under the Central Excise having its place of business at Sahadra and is engaged in the business of manufacturing cigarettes of different brands classifiable under Central Excise Tariff Heading No. 24022010 and 24022040 of the First Schedule to the Central Excise Tariff Act, 1985. The said factory was under the Physical Supervision and control of the Central Excise Officers.
During the course of search, a statement of Shri Santosh Kr Jodhwani, was recorded u/s 14 of the said Act wherein he stated that they have purchased the cigarettes from ATPL without any bills. He further stated that he used to contact Shri Mahesh for purchase of cigarettes and the orders were placed on phone and that the cigarettes were received in his godown directly from ATPL and that the payments were made in cash to different traders upon the instructions of Shri Mahesh. Shri Santosh Kr Jodhwani, also stated that the Appellant is owner of ATPL.
In consequence to the said investigation, a show cause notice was issued to them by the Addl. Director General with the allegations that the Appellant is the owner of ATPL and the unregistered factory premise of ATPL and that the Appellant has engaged in clandestine removal of filter and non-filter cigarettes under different brand names. The said Notice was adjudicated by the Ld. Adjudicating Authority vide the impugned Order-in-Original wherein the entire demand as proposed in the Notice was confirmed along with interest and imposition of equivalent penalty. The present proceedings are against the demands confirmed against the Appellant in this impugned order.
Conclusion- Held that the issue involved in the present appeals is clandestine removal of goods without payment of Central Excise duty. The charge of clandestine removal is a very serious charge which entails serious consequences which are both civil and criminal in nature. Hence, before levelling such serious charge of clandestine removal of goods, there must be sufficient evidence on record leading to conclusive proof of production of goods, their removal from the factory by any mode of transportation and clandestine clearances to buyers. The onus to establish such clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by production of sufficient, cogent and tangible evidences. The said allegation has to be proved by bringing on record evidences procurement of all the raw materials clandestinely in proportionate quantity and it must be proved to whom the goods have been sold.
Held that the Revenue has not brought in any evidence to corroborate the allegation that the Appellant were the actual manufacturers of the cigarettes. In their submissions, the Appellant cited various loopholes in the investigation and argued that the demand of duty made and penalty imposed on him in the impugned order are not sustainable. The decision cited by him supports his contention.
Held that the demand of duty on the Appellant in the impugned order is not sustainable. Since, the evidence available on record does not indicate the involvement of the Appellant in the clandestine manufacturing and clearance of cigarettes, no penalty imposable on them.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Appellant, Raj Kumar Gupta alias Shri Raj Kumar Sultania alias Shri Raju Sultania has filed the present appeal aggrieved against the impugned order dated 05.10.20 18 passed by the Commissioner, CGST & Central Excise, Patna- 1, Bihar. The Order portion of the impugned order passed by the Commissioner is as under:
I confirm the demand of Central Excise Duty including AED, NCCD, Education Cess and Secondary and higher Education Cess amounting to Rs.3,20,57,950/- (Rs. Three Crores Twenty lakhs fifty seven thousand nine hundred and fifty only) as per the annexure B1 B6 forming part of Show Cause Notice and Rs.1,09,55,570/- (Rs. One Crore Nine Lakhs fifty five thousand five hundred and seventy only) as per the annexure a1 to a4 of the Show Cause Notice. Thus totaling Rs.4,30,13,520/- (Rupees four crore thirty lakh thirteen thousand five hundred twenty only) of Central Excise Duty including AED, NCCD, Ed Cess and Secondary and higher Ed. Cess is hereby confirmed and order to recover the same from the noticee no. 1 under the provisions of Section 11A of the Central Excise Act, 1944.
(ii) I order for the recovery of interest at the applicable rate from the noticee no. -1 on the amount as confirmed at para 105 (i) above under the provisions of Section 11AA of the Central Excise Act.
(iii) I impose a penalty of Rs.4,30,13,520/- (Rupees four crore thirty lakh thirteen thousand five hundred twenty only), upon the noticee no. -1 Shri Rajkumar Gupta alias Raju Sultania alias Rajkumar Sultania, under the provisions of Section 11AC of the Central Excise Act for the reasons discussed above.
(iv) I order to confiscate 16,54,261 sticks of filter cigarettes of ‘sunils Two’ & ‘India 10’ brands valued at Rs.32,38,409/- which were seized on 3005.2014 from the unregistered cigarette manufacturing factory of Shri Raju Sultania running in the name and style of M/s Shani Dev Enterprises at Vill.- Mohiuddinpur (Vill.-Narma), Fatuha Daniayava Road, Nai Sadak, Dist.-Patna under Rule 25 of the Central Excise Rules, 2002. However, I give an option to pay redemption fine in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I order to confiscate the unaccounted stock of raw materials/paking materials totally valued at Rs.93,974/- which were seized on 30.05.2014 from the unregistered cigarette manufacturing factory of Shri Raju Sultania, running in the name and style of M/s Shani Dev Enterprises at Vill-Mohiuddinpur (Vill- Narma), Fatuha Daniayava Road, Nai Sadak, Dist.- Patna under Rule 25 of the Central Excise Rules, 2002. However, I give an option to ay redemption fine in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I also order to confiscate the unaccounted stock of raw materials/packing materials totally valued at Rs.5,43,675/- which were seized on 30.05.2014 from the undeclared godown o Shri Raju Sultania situated in the vicinity of unregistered cigarette manufacturing factory, running in the name and style of M/s Shani Dev Enterprises at Vill.- Mohiuddinpur (Vill-Narma), Fatuha Daniayava Road, Nai Sadak, Dist.- Patna under rule 25 of the Central Excise Rules, 2002. However, I give an option to pay Redemption fine in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I further order to confiscate the unaccounted quantity of 2,52,10,000 sticks of non-filter and filter cigarettes of various brands valued at Rs.4,20,68,760/- which had been seized on 30.05.2014 from the undeclared godown of Shri Raju Sultnia Situated at Didarganj, Near Godrej Warehouse, Fatuha, Dist.-Patna under Rule 25 of the Central Excise Rules, 2002. However, I give an option to pay redemption fine in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I also order to confiscate the unaccounted stock of raw materials / packing materials totally valued at Rs.12,37,770/- which had been seized on 30.05.2014 from the undeclared godown of Shri Raju Sultania situated at Didarganj, Near Godrej Warehouse, Fatuha, Dist.- Patna under Rule 25 of the Central Excise Rules, 2002. However, I give an option to pay Redemption fine in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I order to confiscate the unaccounted quantity of 4,79,500 sticks of filter cigarettes of various brands valued at Rs.9,35,025/- seized on 30.05.2014 the undeclared godown of Shri Raju Sulatania situated at Jharkhand Tola, Village-Daniyava, Dist.- Patna under Rule 25 of the Central Excise Rules, 2002. However, I give an option to pay Redemption fie in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I also order to confiscate the Two mak 8 machines, two duplex machine and two East India packing machines illegally installed in the unregistered cigarette manufacturing factory situated at village Mohiuddinpur (Village Narma) Daniyava Fatuha Road, Nai Sadak, Dist. Patna. However, I give an option to pay Redemption fine in lieu of confiscation which shall be 50% of the value of the goods.
I also order to confiscate the unaccounted quantity of 3,24,000 sticks of filter cigarettes of “India 10′ brand valued at Rs.6,48,000/-, illicitly manufactured and clandestinely cleared without payment of Central Excise duty by Shri Raju Sultania and were seized on 18.11.2014 from the business premised of Shri Anand Tejwani, Proprietor of M/s Shankar Traders, G.E.Road, Opp.- Kikabhai Compex, Near, Jalaram Sweets, Rajnardgaon (C.G.) under Rule 25 of the Central Excise Rules, 2002. However, I give an option to pay Redemption fine in lieu of confiscation which shall be 50% of the value of the goods. The release of such goods on payment of redemption fine shall be done only after the goods are found to be fit for human consumption and meets the other legal requirement relating to health and safety.
I impose a penalty of Rs.4,30,00,000/- (Rupees four crore thirty lakh only) upon shri Ramesh Sultania (Noticee no. 2), under the provisions of rule 26 of the Central Excise Rules, 2002 for the reasons discussed above.
I impose a penalty of Rs.4,30,00,000/- (Rupees four crore thirty lakh only) upon Shri Lallu Parsad (Noticee no. 4), under the provisions of Rule 26 of the Central Excise Rules, 2002 for the reasons discussed above.
Impose a penalty of Rs.4,30,00,000/- (Rupees four crore thirty lakh only) upon shri Deepak Singh (Noticee no. 3), under the provisions of Rule 26 of the Central Excise Rules, 2002 for the reasons discussed above.
I impose a penalty of Rs. 4,30,00,000/- (Rupees four crore thirty lakh only) upon Shri Santosh Jodhwani (Noticee no. 5) under the provisions of Rule 26 of the central Excise Rules, 2002 for reasons discussed above.
I impose a penalty of Rs.4,30,00,000/- (Rupees four crore thirty lakh only) upon Shri Anand Tejwani (Noticee no. 6) under the provisions of Rule 26 of the central excise rules, 2002 for the reasons discussed above.
If the amount determined at para 105(i) above is paid within 30 days from the receipt of the order along with the interest payable, then as per proviso to Section 11AC of the Act, the penalty imposed at para 105 (iii), (xii) (xiii), (xiv) (xv) and (xvi) above will be only 25% of the amount determined at para 101(i) above. The benefit of reduced penalty shall be available only if the reduced amount of penalty has also been paid within the period of thirty days from the receipt of this order.
2. The Appellant states that the present dispute relates to the demand of Central Excise Duty including AED, NCCD, Ed. Cess, and secondary and higher Ed. Cess amounting to Rs. 4,30,13,520/- for the period of May, 2013 and May, 2014, and penalty imposed on the Appellant. The impugned order deals with various demands, however, the present appeal is only against the demand of duty along with interest and penalty imposed on the Appellant in the impugned order.
3. The briefly stated facts of the case are that on the basis of an intelligence received by the DGCEI (Hqrs.), a search was conducted at the business premises of one Shri Santosh Kr Jodhwani, Proprietor of M/s S.D. & Company, situated at Ramdev Market, Near Gole Bazar, on account evasion of Central Excise duty by way of suppression of production and clandestine removal of cigarettes without payment of central excise duty. Search was also conducted at a godown situated adjacent to Maa Durga temple. During the search it was found that stock of filter and non-filter cigarettes of various brands was found wherein the manufacturer was mentioned as “M/s Ankit Tobacco Pvt. Ltd.” (hereinafter referred to as “ATPL”) and the said Santhosh Kr. Jodhwani failed to produce any purchase documents against the stock of cigarettes found at the premises.
3.1 The Appellant states that ATPL is registered under the Central Excise under central excise registration no. AAICA8640FEM001 having its place of business at Sahadra, Noorpur, Patna, Bihar – 800008 and is engaged in the business of manufacturing cigarettes of different brands classifiable under Central Excise Tariff Heading No.s 24022010 and 24022040 of the First Schedule to the Central Excise Tariff Act, 1985. The said factory was under the Physical Supervision and control of the Central Excise Officers.
3.2 During the course of search, a statement of Shri Santosh Kr Jodhwani, was recorded u/s 14 of the said Act wherein he stated that they have purchased the cigarettes from ATPL without any bills. He further stated that he used to contact Shri Mahesh for purchase of cigarettes and the orders were placed on phone and that the cigarettes were received in his godown directly from ATPL and that the payments were made in cash to different traders upon the instructions of Shri Mahesh. Shri Santosh Kr Jodhwani, also stated that the Appellant is owner of ATPL.
3.3 The Appellant states that search was later carried out at the premises of ATPL including an unregistered factory premises of ATPL situated at Village – Mohiduddinpur (Village – Narma), Fatuha Daniyava Road, Dist. Patna and two other godowns situated in and around Patna, on 30.05.2014. From the statements recorded during the course search, it was alleged that the Appellant was the owner of ATPL and the unregistered factory premises of ATPL situated at Fatuha Daniyava Road. The Appellant had taken two godowns on rent in Patna and that they were engaged in manufacturing cigarettes from the unregistered premises at Fatuha Daniyava Road, without payment of central excise duty and cleared the same clandestinely from the said premises. In consequence to the said investigation, a show cause notice dated 28.11.2014 was issued to them by the Addl. Director General, DGCEI, New Delhi with the allegations that the Appellant is the owner of ATPL and the unregistered factory premise of ATPL and that the Appellant has engaged in clandestine removal of filter and non-filter cigarettes under different brand names. The said Notice was adjudicated by the Ld. Adjudicating Authority vide the impugned Order-in-Original dated 05.10.20 18 wherein the entire demand as proposed in the Notice was confirmed along with interest and imposition of equivalent penalty. The present proceedings are against the demands confirmed against the Appellant in this impugned order.
4. In their grounds of appeal the Appellant made the following submissions:
(i) The Ld. Adjudicating Authority has grossly erred in confirming the demand against the Appellant when it is settled that the levy of Central Excise duty is upon the manufacturer and that the Appellant is not a manufacturer, rather ATPL is the manufacturer of cigarettes however the department authorities had not even made ATPL a party to the impugned proceedings.
(ii) The Ld. Adjudicating Authority has confirmed the demand on the Appellant merely on the surmises that the Appellant is the owner of ATPL when it was already on record of the departmental authorities that ATPL is duly registered with the Central Excise Department and the registration was granted to them after due verification by the Central Excise Department and that ATPL had been discharging duty and were filing prescribed returns with the department and that ATPL is duly registered under the companies Act, 1956 and has a separate legal identity in the eyes of law.
(iii) The Appellant states that ATPL is the manufacturer of the cigarettes which is alleged to be clandestinely removed, however, no demand was raised against ATPL rather an artificial case had been booked against the Appellant.
(iv) The Appellant states that there is neither any fact nor any statement on record pointing out that the Appellant has himself dealt with the clandestine removal of the goods or any evidence stating that the Appellant had procured raw material, or sale of impugned cigarettes by him to any person or obtained any payments from the alleged buyers or any transportation of the impugned cigarettes in clandestine manner.
(v) The Appellant states that the entire demand raised on the Appellant is based on the statements of the third parties which the Appellant was not allowed to cross-examine even when the Appellant had sought for cross-examination of the persons whose statements were relied upon to confirm the demands against him.
(vi) The Appellant states that the entire basis of confirmation of demand by the Ld. Adjudicating authority is nothing but reiteration of the contents of the SCN without refuting any of the submissions made by the Appellant and thus the demand suffers from infirmity.
(vii) The Appellant states that to establish the allegation of clandestine removal, the department has to undertake examination of various persons who may be a part of such removal such as transporters, customers etc. In the case of the Appellant, the department has not proceeded to inquire against Mr. Mahesh who had stated that the goods were sold by the Appellant to him and the same was the very basis of the start of the investigation against the Appellant.
(viii) The Appellant states that it is a settled principle that the allegation of clandestine removal is a serious one and the same has be brought on record by the department, which has not at all been done in the present case.
(ix) The Appellant relied on the decision of the Tribunal in the case of M/s AMBICA IRON AND STEEL PVT LTD vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX , ROURKELA 2022-TIOL-67-CESTAT-KOL wherein it has been held that clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to (i) Receipt of raw material inside the factory premises, and non-accounted thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products.The department could not bring in any such evidence to substantiate their allegations in the present case.
(xi) The Appellant relied on the decision of the Tribunal Kolkata in the case of M/s. Jai Balaji Industries Limited (Unit-III) Vs. Commissioner of CGST & CX, Bolpur Commissionerate, FINAL ORDER NO. 75583-75585/2020 dated 12/11/2020 wherein it has been held that there should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions.
(xii) The Appellant also relied upon the decision in the case of M/s MSP SPONGE IRON LTD vs COMMISSIONER OF CGST, CENTRAL EXCISE AND CUSTOMS ROURKELA, COMMISSIONERATE 2020-TIOL-523-CESTAT-KOL wherein it has been held that Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible
(xiii) The Appellant also stated that it has been consistently held by various High Courts and Tribunals that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the Revenue by direct, affirmative and incontrovertible evidence, as has been held in the following cases :-
Bihar Foundary & Castings Ltd. Vs. CCE, Ranchi [2019 (8) TMI 527 – CESTAT Kolkata]
Continental Cement Company Vs. Union of India [2014 (309) E.L.T. 411 (All)] – 201 4-TIOL- 152 7-HC-ALL-CX
Balashree Metals Pvt.Ltd. Vs. UOI [2017 (345) ELT 187 (Jhar.)] = 201 6-TIOL-2590-HC-JHARKHAND-CX
CCE, Meerut-I Vs. R.A. Castings Pvt.Ltd. [2012 (26) S.T.R. 262 (All.)]
Popular Paints and Chemicals Vs. CCE & Customs, Raipur [2018 (8) TMI 473 (Tri. -Delhi) = 201 9-TIOL- 1 239-CESTAT-DEL
(xiv) In view of the above submissions, they prayed for setting aside the demands of duty and penalty against the appellant.
5. The Ld. A.R. stated that the investigation has established that the Appellant is the actual manufacturer of the goods. The statements recorded during investigation clearly established that the Appellant was the brain behind the manufacturing and clandestine clearance of cigarettes. Accordingly, they prayed for dismissing the appeal filed by the Appellant.
6. Heard both sides and perused all appeal records.
7. We observe that the initial investigation was conducted against Shri. Santhosh Kr. Jodhwani, wherein stock of filter and non-filter cigarettes of various brands of M/s ATPL was found. The said Santhosh Kr. Jodhwani failed to produce any purchase documents against the stock of cigarettes found at his premises. In his statement, he stated that he used to contact Shri Mahesh for purchase of cigarettes and the orders were placed on phone and that the cigarettes were received in his godown directly from ATPL and that the payments were made in cash to different traders upon the instructions of Shri Mahesh. But, we observe that no statement was recorded from Shri. Mahesh to confirm the statement of shri Santhosh Kr. The investigation has blindly accepted the statement of Shri Santosh Kr Jodhwani, without any evidence. Shri Santhosh Kr. Jodhwani in his statement stated that the Appellant is owner of ATPL. We observe that the investigation has not brought in any evidence to substantiate this claim.
8. We observe that search was later carried out at the premises of ATPL including an unregistered factory premises of ATPL situated at Village – Mohiduddinpur (Village – Narma), Fatuha Daniyava Road, Dist. Patna and two godowns situated in and around Patna on 30.05.2014. During the search two cigarette making machines were found in the unregistered premises of ATPL situated at Fatuha Daniyava Road. Cigarettes bearing the brand name of ATPL were found in that premises. Accordingly, it was concluded that the Appellant was engaged in manufacturing of cigarettes from the said unregistered premises at Fatuha Daniyava Road, without payment of central excise duty and cleared the same clandestinely from the said premises. The investigation arrived at this conclusion manily on the ground that ATPL brand cigarettes were found in the said premises and the statements recorded from the Appellant and various third parties.
9. In their submissions the Appellant stated that the Ld. Adjudicating Authority has erred in confirming the demand against the Appellant when it is settled that the levy of Central Excise duty is upon the manufacturer and that the Appellant is not a manufacturer, rather ATPL is the manufacturer of cigarettes however the department authorities had not even made ATPL a party to the impugned proceedings. The Ld. Adjudicating Authority has confirmed the demand on the Appellant merely on the surmises that the Appellant is the owner of ATPL when it was already on record of the departmental authorities that ATPL is duly registered with the Central Excise Department and the registration was granted to them after due verification by the Central Excise Department and that ATPL had been discharging duty of central excise. ATPL is duly registered under the companies Act, 1956 and has a separate legal identity in the eyes of law. Having two directors and the appellant is neither the director nor the employee of ATPL. ATPL is the manufacturer of the cigarettes which is alleged to be clandestinely removed, however, no demand is raised against ATPL.
10. We agree with the contention of the Appellant. Central Excise duty is payable on the excisable goods manufactured by a manufacturer. Section 2(f) of the Central Excise Act, 1944 defines a ‘manufacturere’ as below:
“(f) 5 ” manufacture” includes any process,- (i) incidental or ancillary to the completion of a manufactured product;
(ii) Which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture, (5 of 1986). and the word” manufacturer” shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable, goods, but also any person who engages in their production or manufacture on his own account;]”
From the above definition, it can be seen that in order to construe a person as a ‘manufacturer’ it must be established that he employs his labour for production of goods or engages himself directly and produce goods on his own account.
11. In the present case, we observe that there is no evidence brought on record by the investigation to establish that the Appellant has engaged his labour to manufacture cigarettes in the Fatuha Daniyava Road premises where two cigarette making machines were found. There was no evidence available on record to implicate the Appellant in the manufacture of cigarettes found in the Fatuha Daniyava Road premises or at the other The cigarettes found the said premises were bearing the brands owned by M/s ATPL. Obviously M/s ATPL should be questioned first regarding the ownership of the goods, since they were registered with the department for the manufacture and clearance of cigarettes under various brand names owned by them. Apparently, the investigation has not questioned any of the Directors of M/s ATPL. No demand was raised on them. The investigation has blindly relied on the third party statements and concluded that ATPL brand cigarettes were manufactured by the Appellant in their unregistered premises at Fatuha Daniyava Road and demanded duty from them.
12. We observe that there is no evidence available on record to establish clandestine manufacture and clearance of cigarettes by the Appellant. The investigation has not brought in any evidence to establish that the Appellant had procured raw material or sale of impugned cigarettes by him to any person or obtained any payments from the alleged buyers or any transportation of the impugned cigarettes. In the absence of any such evidence to establish that the Appellant was the actual manufacturer of the cigarettes found at the unregistered premises at Fatuha Daniyava Road and the other godowns, the tag of ‘manufacturer’ cannot be fixed on the Appellant. The Appellant do not fall within the definition of ‘manufacturer’ as defined under Section 2(f) of the Central Excise Act, Accordingly, we hold that the Appellant cannot be considered as the manufacturer of cigarettes in this case and duty cannot be demanded from them for the cigarettes said to have been manufactured at the unregistered premised at Fatuha Daniyava Road and the cigarettes found at other godowns. Clandestine manufacture and clearance of cigarettes cannot be made merely on the basis of assumptions and presumptions. There must be tangible, direct affirmative and incontrovertible evidence available to establish clandestine clearance. This view has been supported by various decisions of the Hon’ble High Courts and Tribunals.
13. In the case of M/s AMBICA IRON AND STEEL PVT LTD vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX , ROURKELA 2022-TIOL-67-CESTAT-KOL, the Tribunal has held as under:
“13.We find that the issue of ‘question of fact’ to be decided in this case is whether the Appellant has clandestinely removed the goods on which the duty demand has been made.
14.The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to (i) Receipt of raw material inside the factory premises, and non-accounted thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters’ documents, such as L.Rs., statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. Whereas, in the instant case, no such clinching or corroborative evidences to the above effect have been brought on record.
15.In the instant case, the entire case of the Revenue is based on the Kaccha Chithas seized from the residence of the Director. The manner in which the said Kaccha Chithas is seized has been strongly agitated by the Appellant. We find that the said Kaccha Chithas/documents should have been seized in the presence of the Director. There is considerable force in the contention of the Appellant that the Kacha Chithas relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue of fact i.e. in the present case “the charge of clandestine clearance” cannot be levelled against the assessee.
16.We find that in the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods has been procured to manufacture goods for clandestine clearance. No efforts have been made by the investigating agencies to establish the existence of any unaccounted manufacturing activity in the form of unaccounted raw material, shortage of stock, shortage of raw material/finished goods, excess consumption of electricity, unaccounted labour payments, interrogation of buyers/transporters or any incriminating record/document to suggest any flow back of cash etc. The Revenue authorities in this case have failed to discharge the burden of proving the serious charge of clandestine clearance or undervaluation with cogent and clinching evidence. It has been consistently held that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the Revenue by direct, affirmative and incontrovertible evidence, as has been held in the following cases :-
