Case Law Details
Asian Plywood Industries Private Limited Vs Commissioner of CGST & Excise (CESTAT Kolkata)
The demand of Customs duty quashed on ground of the absence of corroborative evidence for the clandestine removal of goods
Facts- Asian Plywood Industries Private Limited, the appellant assessee was engaged in the manufacturing and trading of plywood, flush doors, and blackboard. Documents were seized by the investigating team from the residence of the accountant of assessee who had stated how the Books of Account are being maintained for the manufacturing activity of the assessee and based on those records and the case had been made out of clandestine removal. The assessee contended that the documents seized by the investigating team from the residence of the accountant cannot be the primary evidence to claim the allegation of clandestine removal as the same was not corroborated by cogent evidence. The assessee appealed against the order passed by the Commissioner to confirm the demand for Customs Duty along with a penalty.
Conclusion- Held that the only document relied upon by the Revenue to allege clandestine removal of goods, is the record recovered from the residence of the Accountant of the appellant, who explained that he is the author of the said document and explained the contents of the documents. Now the question arises, on the basis of the said documents, can the demand be confirmed alleging clandestine removal of goods. The clandestine manufacture and removal of excisable goods was to be proved by tangible, direct, affirmative, and incontrovertible evidence, and the department failed to examine all the aspects relating to the clandestine removal of goods and there was no corroborating evidence relating to the clandestine removal of goods by the assessee.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order demanding duty of Rs.2,81,92,244/- for the period 19.06.2016 to 31.03.2017 on account of clandestine removal of goods.
2. The facts of the case are that the appellant is engaged in manufacturing and trading of plywood, flush doors and black board. An investigation carried out by DGCI, Jamshedpur on 01.06.2018 wherein search was conducted at the factory and office premises, residence of the Director, residence of Accountant and residence of the sales man of the appellant and some documents were seized from the residential premises of the Accountant of the Appellant. The Accountant in his statement dated 01.06.2018 & 24.08.2018, explained that these documents were maintained by him and contain the detail of income and expenditure for different periods. Entries on the left side pertain to income while the entries on the right side pertain to expenditure and that all the entries are made by placing decimal after one digit towards the left to conceal the actual figure.
2.1 On the basis of the said investigation, a show-cause notice dated 01.10.2019 was issued to the appellant alleging clandestine removal of goods with an intent to evade payment of duty during the period 19.06.2016 to 31.03.2017.
2.2 The show-cause notice was adjudicated and the demand of duty was confirmed along with interest and penalty was also imposed .
2.3 Against the said order, the appellant is before us
3. The ld.Counsel appearing on behalf of the appellant submits that the documents seized by the investigating team from the residence of the Accountant, cannot be the primary evidence to claim the allegation of clandestine removal as the same is not corroborated by a cogent evidence. In support of his contentions, he relied on the decision of this Tribunal in the case of M/s Sun Ultra Technologies Private Limited & Others Vs. Commissioner of Central Excise, Indore : 2016 TIOL 161 CESTAT – DEL.
3.1 He further submitted that to establish the allegation of clandestine removal, the Department has to undertake examination of various persons, who are the part of such removal, such as, transporters, customers etc. and in that case, the Department had not proceeded with any investigation to that effect. It is the submission that the allegation of clandestine removal is very serious one and in this regard, he relied on the decision of this Tribunal in the case of M/s Ambica Iron & Steel Private Limited Vs. Commissioner of Central Excise, Customs & Service Tax, Rourkela : 2022-TIOL– 67-CESTAT-KOL.
3.2 Further, he relied on the decision of this Tribunal in the case of M/s Jai Balaji Industries Limited (Unit III) Vs. Commissioner of CGST & Excise, Bolpur vide Final Order No.75583-75585/2020 dated 12.11.2020.
3.3 He also relied on the decision of this Tribunal in the case of M/s Bharat Alloys Pvt. Limited Vs. Commissioner of CGST & Excise, Ranchi : 2020 TIOL 1339 CESTAT KOL.
3.4 Further, he relied on the decision of this Tribunal in the case of Super Smelters Limited Vs. Commissioner of Customs, Central Excise & Service Tax, Durgapur : 2020 (371) ELT 751 (Tri.-Kolkata).
3.5 He also relied on the decision of this Tribunal in the case of M/s MSP Sponge Iron Limited Vs. Commissioner of CGST & Excise & Customs,Rourkela : 2020 TIOL 523 CESTAT KOL.
3.6 He therefore submitted that no investigation was conducted by the Department for purchase of raw material, use of electricity, sale of final products, payment, realization of sale proceeds, mode and flow back of funds. Therefore, the show-cause notice has been issued on whims and fancies of the Department.
3.7 It is his submission that the appellant does not have the capacity to manufacture of such huge quantity of finished goods. There is nothing on record to show that the appellant was in a position to manufacture of such excess quantity of finished goods than what stands reflected in their statutory records. In this regard, the ld.Counsel for the Appellant relied on the decision of this Tribunal in the case of Commissioner of Service Tax, Delhi I VS. Jindal Nickel and Alloys Limited : 2017 – TIOL 3784 – CESTAT – DEL.
3.8 The ld.Counsel for the appellant further submitted that the appellant is a small scale unit and thus is enjoying the exemption available to SSI Unit in terms of Notification No.8/2003-CE dated 01.03.2003, which has given concession to SSI units whose turnover is less than Rs.400 lakhs in proceeding financial year to remove goods upto Rs.150 lakhs in the current financial year without payment of duty condition being the SSI Unit does not avail cenvat credit.
3.9 It is his submission that the annual turnover in the financial year 2016-17 as per the Excise Return is Rs.3,85,53,651/-, which is less that the threshold limit of Rs.400 lakhs for availment of SSI exemption. Therefore, the appellant is entitled to avail the exemption for period April, 2017 to June, 2017.
3.10 He further submitted that if the charge of clandestine removal is not sustainable, then his turnover is below within the threshold limit of Rs.400 lakhs for availment of SSI exemption, therefore, it is his submission that the impugned order is to be set aside and the appeal be allowed with consequential relief.
4. On the other hand, the ld.A.R. for the Revenue submitted that the case has been made out on the basis of documents recovered from the residential premises of the Accountant of the appellant, who has stated that how the Books of Account are being maintained for manufacturing activity of the appellant and on the basis of those records, the case has been made out of clandestine removal.
5. Heard the parties and considered the submissions.
6. We find that in this case, the only document relied upon by the Revenue to allege clandestine removal of goods, is the record recovered from the residence of the Accountant of the appellant, who explained that he is the author of the said document and explained the contents of the documents. Now the question arises, on the basis of the said documents, can the demand be confirmed alleging clandestine removal of goods.
7. We find that in the case of M/s Ambica Iron and Steel Private Limited (supra), this Tribunal examining the issue of clandestine removal of goods, has observed 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 recorts, transporters’ documents, such as L.R.s, 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 leveled 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 :-
– Bihar Foundary & Castings Ltd. Vs. CCE, Ranchi [2019 (8) TMI 527 – CESTAT Kolkata] – Para 18
– Continental Cement Company Vs. Union of India [2014 (309) E.L.T. 411 (All)] – Para 12 = 2014-TIOL-1527-HC-ALL-CX
– Balashree Metals Pvt.Ltd. Vs. UOI [2017 (345) ELT 187 (Jhar.)] = 2016-TIOL-2590-HC-JHARKHAND-CX – Para 5 vi
– 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) = 2019-TIOL-1239-CESTAT-DEL – Para 17
17. We further find that the Revenue had neither disclosed any material nor described the method of stock taking to counter the case. We are unable to accept the contention of the Revenue without any basis, such as, the details of the weighment slip, counting slip etc., as the case may be. It cannot be on the basis of eye estimation or otherwise.
18. The learned Commissioner has asserted in the impugned order that the demand based on the Kacha Chithas and the statement of Director is sustainable and that no further corroboration was required in view of the clinching nature of the oral and documentary evidence establishing clandestine production and removal of finished goods at para 17.2 of the Order-in-Original is clearly contrary to the judicial precedents cited supra.
19. We further find that the contention of the learned Commissioner in the impugned Order-in-Original that it is neither feasible nor desirable to cause enquiry at all possible points concerning the clearances at Para 17.5 of the impugned order itself clarifies that the demand has been raised solely on the basis of assumptions and presumption and no corroborative evidence was brought out by the Revenue except the so called Kacha Chithas and statement of Director.
20. We are of the view that the learned Commissioner made a fundamental error by making assumptions only just to confirm the demand on the allegation of clandestine clearance. It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld.
21. In view of the above discussions, the impugned order cannot be sustained and accordingly the same is set aside. The Appeal is allowed with consequential relief as per law”.
8. Admittedly, the Revenue has not come up with evidence of receipt of raw materials used for clandestine manufacture of the finished goods, manufacturing of finished goods with the installed capacity of consumption of electricity, labour deployment and payment made to them. No evidences were in regard to the discrepancies in the stock of raw materials and finished goods with reference to the entries in the factory premises and transportation documents, amount of receipts, buyer of the goods etc. No such effect has been made by the Revenue to allege clandestine removal of goods. Although, the said records contains certain names therein, but the Revenue has not examined these persons.
9. In that circumstances, the charge of clandestine removal of goods is not sustainable against the appellant.
10. We further take note of the fact that the annual turnover of the appellant is less than the below of threshold limit for availment of exemption Notification No.08/2003-CE dated 01.03.2003.
In that circumstances, the impugned demand is not sustainable. Accordingly, the same is set aside and the appeal is allowed.
(Pronounced in the open court on 28.07.2023)
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