2019 (6) TMI 1520 - AT - Central Excise

Clandestine Removal - MS Ingots - excess consumption of electricity - demand based on third party evidence - penalty on Director - HELD THAT - Since the drop of demand qua excess electricity consumption has not been objected on the part of the Department there is no appeal filed otherwise. Demand based on third party evidence - the case of Revenue is based upon the statement of the representative of M/s. Monu Steels i.e. the third party evidence and the documents recovered from their premises - HELD THAT - Admittedly no search or recovery got conducted in appellant s premises. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal in the absence of any corroborative evidence is well established - The Hon ble High Court of Allahabad in the case of M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA OTHERS 2014 (9) TMI 243 - ALLAHABAD HIGH COURT has held that the charge of clandestine removal is a serious charge which is required to be proved by the Revenue by tangible and the sufficient evidence. It was clarified by the Hon ble Tribunal that mere statements of buyers that too based on memories were not sufficient without support of any documentary evidence - Thus the Commissioner (Appeals) has committed an error while relying upon third party evidence to confirm the demand qua service charge of clandestine removal. Since the demand has been set aside the question of imposition of any penalty on the Director of the company does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged excess electricity consumption during manufacture
2. Alleged clandestine removal of manufactured MS Ingots

Analysis:

Issue 1: Alleged excess electricity consumption during manufacture
The appellants, engaged in the manufacture of MS Ingots, were alleged to have consumed electricity in excess during their manufacturing process. A significant portion of the total demand raised by the Department was dropped by the adjudicating authority concerning this aspect. The appellant argued that the Department did not appeal the dropped demand, and cited relevant case laws to support their contention. The Tribunal upheld the dropping of the demand related to excess electricity consumption, as the Department did not object to it and relied on a decision of the Hon'ble Supreme Court. Therefore, the order was upheld in this regard.

Issue 2: Alleged clandestine removal of manufactured MS Ingots
Regarding the alleged clandestine removal of manufactured MS Ingots, the case of the Revenue was based on third-party evidence and documents recovered from another entity's premises. The Tribunal noted that no search or recovery was conducted at the appellant's premises. It was established through various legal precedents that findings of clandestine removal cannot be solely upheld based on third-party documents without corroborative evidence. The Tribunal referred to several judgments to emphasize the requirement for tangible evidence to prove charges of clandestine removal. As the Commissioner relied on third-party evidence to confirm the demand, the order was set aside, and the appeals were allowed. Consequently, the imposition of any penalty on the Director of the company was also set aside due to the demand being overturned.

In conclusion, the Tribunal found errors in the Commissioner's reliance on third-party evidence to confirm the demand related to clandestine removal. The order was set aside, and the appeals were allowed, leading to the dismissal of the penalty on the Director of the company.