Demand of duty on clandestine removal of excisable goods cannot be confirmed solely on the basis of presumptions and assumptions

Continental Cement Company and the Directors of the Company (Appellants) were manufacturers of ordinary Portland cement which was subject to Excise Duty under Central Excise Act, 1944.

The Department received an anonymous complainant indicating therein that during the period February 9, 1993 to September 27, 1995 about 3839.350 MT ordinary Portland cement was illegally sold which involved Excise Duty amounting to Rs.7,20,154/-, by using parallel documents like GP1s, invoices, challans , Bills,  cash memo and GRs, etc.

The Department issued the Show Cause Notices and confirmed the demand of Excise Duty, which was set aside by the Commissioner (Appeals). However, the demand was restored by the Hon’ble Tribunal on appeal by the Department.

The Appellants preferred an appeal to the Hon’ble Allahabad High Court.

The Hon’ble Allahabad High Court noted the anonymous complaints were made on the basis of forged documents which were prepared by a Director who was removed from the Board of Directors. Therefore, the Hon’ble High Court held that there was no clinching evidence furnished by the Department in nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, etc. Accordingly, it was held that demands cannot be confirmed solely on the basis of presumptions and assumptions. It was further held that clandestine removal is a serious charge against the Appellants, which was required to be discharged by the Revenue by production of sufficient and tangible evidence.