Jolla Steel Pvt. Ltd. Vs Commissioner of Central GST Commissionerate (CESTAT Kolkata)
Conclusion: Clandestine removal could not be sustained on mere assumptions or third-party statements without corroborative evidence and statutory compliance under Section 9D. In absence of incriminating material from assessee and failure of the Department to establish a complete chain of evidence, the demand, interest, and penalty were unsustainable.
Held: Assessee was a manufacturer of M.S. Ingots, was subjected to proceedings based on investigation conducted at a third party, M/s Shree Parasnath Re-Rolling Mills Ltd. Allegations were made that assessee clandestinely cleared 6077.510 MT of goods without invoices based on statements and documents recovered from the third party, leading to a duty demand of ₹2.64 crore along with interest and penalty. Notably, no incriminating material was recovered from assessee’s premises, and the adjudication order was passed without granting effective opportunity of hearing. Assessee contended that the entire case was based solely on third-party statements and records without any corroborative evidence such as excess production, raw material consumption, transport details, or flow of funds. It was argued that reliance on such statements without compliance with Section 9D of the Central Excise Act, 1944 (i.e., examination and cross-examination of witnesses) rendered them inadmissible. Further, denial of proper hearing violated principles of natural justice. Revenue, on the other hand, relied on investigation findings and supported the adjudication order, asserting that the evidence gathered during search justified the demand. Tribunal held that allegations of clandestine removal must be supported by cogent, corroborative, and independent evidence, which was absent in the present case. Reliance solely on third-party records and untested statements, without following mandatory procedure under Section 9D, rendered such evidence inadmissible. Further, absence of investigation into key factors such as production capacity, raw material procurement, electricity consumption, transportation, and financial trail vitiates the demand. The adjudication also suffered from violation of natural justice due to lack of proper hearing.
