2025 (6) TMI 355 - AT - Central Excise

Clandestine removal - demand based on pink slips which were recovered during the course of search at the premises of M/s. JBIL - HELD THAT - In the case of M/s Jai Balaji Industries Ltd. 2023 (8) TMI 989 - CESTAT KOLKATA this Tribunal has dropped the charge of clandestine clearance of goods. In these circumstances we find that the pink slips which were recovered during the course of search at the premises of M/s. JBIL cannot be a basis for alleging clandestine clearance by M/s. JBIL to the appellants. As the appellants have not received any goods against the said slips the Tribunal in the case of M/s Jai Balaji Industries Ltd. observed that The DGCEI officers visited the premises of M/s. Laxmi Narain Metallic Pvt Ltd. Kolkata who was one of the buyers of JBIL-III and JBIL-IV and their godown on 20.02.2015. A statement of Shri Girish Tikmani Director of M/s. Laxmi Narain Metallic (P) Ltd was recorded on 20.02.2015 wherein he inter alia stated that during the course of search of their factory certain documents were recovered which showed that JBIL had sold Pig Iron on account of Shri Girish Tikmani on bill as well as without bill. The conclusion drawn by the adjudicating authority that the pink slips were only prepared when the goods were cleared without invoices is not substantiated by any evidence. Conclusion - i) The cash seized during the course of investigation from the appellants is to be released immediately. ii) No penalty is imposable on the appellants. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the cash amount recovered from the appellants during the course of investigation can be confiscated on the allegation that it was meant for payment of clandestinely cleared goods by M/s. Jai Balaji Industries Limited (JBIL).

- Whether the penalties imposed on the appellants are sustainable in light of the allegations of clandestine removal of goods.

- The legal effect of the Tribunal's prior decision in the case of M/s. Jai Balaji Industries Limited, where charges of clandestine clearance were dropped.

- The evidentiary basis for linking the appellants to clandestine clearance and the consequent confiscation and penalties.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Confiscation of Cash Recovered from Appellants

Relevant Legal Framework and Precedents: Confiscation of cash or property under central excise law requires a clear nexus between the seized cash and the alleged clandestine removal of goods. The burden lies on the Revenue to prove beyond reasonable doubt that the cash was intended for payment related to such illegal activity.

Court's Interpretation and Reasoning: The Tribunal relied heavily on its earlier decision in the case involving M/s. Jai Balaji Industries Limited, where the charge of clandestine clearance of goods was dropped after detailed examination of evidence. The Tribunal observed that the pink weighment slips, which were purportedly evidence of clandestine clearance from JBIL to the appellants, could not form a basis for such allegations since the clandestine clearance charge itself was not sustained.

Key Evidence and Findings: The investigation revealed pink weighment slips allegedly evidencing receipt of pig iron consignments by the appellants without proper invoices. However, the Tribunal noted that these slips were not conclusively linked to clandestine clearance. Additionally, the appellant no. 2 retracted his statement implicating the cash as payment for clandestine goods. The prior Tribunal ruling found the evidence insufficient to prove clandestine clearance by JBIL.

Application of Law to Facts: Since the foundational charge against JBIL was dropped, the alleged link between the cash recovered from appellants and clandestine clearance was severed. The Tribunal held that without proof of clandestine clearance, confiscation of cash on the basis that it was payment for such goods is unsustainable.

Treatment of Competing Arguments: The Revenue contended that the cash was meant for payment of clandestinely cleared goods, relying on the investigative findings. The appellants argued that the prior Tribunal decision negated the charge and that the cash recovery was not proven to be connected to illegal activity. The Tribunal accepted the appellants' submissions, emphasizing the absence of conclusive evidence.

Conclusion: The cash amount seized from the appellants must be released as confiscation is not justified.

Issue 2: Sustainability of Penalties Imposed on the Appellants

Relevant Legal Framework and Precedents: Penalties under central excise law are imposed based on confirmed violations such as clandestine removal of goods. Penalties cannot be sustained without a proven violation.

Court's Interpretation and Reasoning: Given that the clandestine clearance charges against JBIL were dropped and the evidence against appellants was found insufficient, the Tribunal held that penalties imposed on the appellants cannot be sustained.

Key Evidence and Findings: The Tribunal reviewed the investigative records, including statements and seized documents, and found no substantive evidence linking the appellants to clandestine clearance or illegal payments.

Application of Law to Facts: Penalties imposed on appellants are contingent on proof of wrongdoing. Since the foundational charge was not established, penalties must be set aside.

Treatment of Competing Arguments: The Revenue supported the penalties based on the investigation, while appellants relied on the prior Tribunal ruling and lack of evidence. The Tribunal favored the appellants' position.

Conclusion: No penalty is imposable on the appellants.

Issue 3: Effect of Prior Tribunal Decision on Current Proceedings

Relevant Legal Framework and Precedents: Decisions of the Tribunal on the same facts and parties are binding unless overturned. The principle of res judicata and consistency in adjudication apply.

Court's Interpretation and Reasoning: The Tribunal explicitly referred to the prior ruling in the case involving M/s. Jai Balaji Industries Limited where clandestine clearance charges were dropped after detailed scrutiny of evidence. This prior decision directly impacts the current proceedings against the appellants, as the alleged clandestine clearance was the basis for confiscation and penalties.

Key Evidence and Findings: The prior order analyzed extensive evidence including weighment slips, computer data, statements of weighbridge in-charges, and other documentary evidence, and found the clandestine clearance charge unsubstantiated.

Application of Law to Facts: The Tribunal applied the principle that where the foundational charge is dropped, consequential actions such as confiscation and penalties based on that charge must also fail.

Treatment of Competing Arguments: The appellants relied on the prior decision to challenge the current confiscation and penalties. The Revenue argued for sustaining the order, but the Tribunal gave primacy to the earlier ruling.

Conclusion: The prior decision is binding and leads to the dismissal of the current allegations and sanctions against the appellants.

3. SIGNIFICANT HOLDINGS

- "We find that the pink slips which were recovered during the course of search at the premises of M/s. JBIL cannot be a basis for alleging clandestine clearance by M/s. JBIL to the appellants. As the appellants have not received any goods against the said slips..."

- "The conclusion drawn by the adjudicating authority that the pink slips were only prepared when the goods were cleared without invoices, is not substantiated by any evidence."

- "In view of the above observations made by this Tribunal in the case of M/s. Jai Balaji Industries Ltd. (supra), we hold that the proceedings against the appellants are not sustainable."

- "Consequently, the cash seized during the course of investigation from the premises of the appellant cannot be confiscated and the same is required to be released."

- "We hold that no penalty is imposable on the appellants."

- Final determinations:

a) The cash seized during the course of investigation from the appellants is to be released immediately.

b) No penalty is imposable on the appellants.