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CX – Charges of clandestine removal of goods fall flat where no evidence points to receipt of consideration & no statements of purchasers of such goods are recorded: CESTAT

2019-TIOL-2255-CESTAT-AHM

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, 2ND FLOOR, BAHUMALI BHAVAN, ASARWA, AHMEDABAD

Appeal Nos. E/371 & 372/2011

Arising out of Order-in-Original No. 18/VDR-II/MP/ADJ/SHREENATH PLASTO/D-WAG/COMMR/2010, Dated: 15.12.2010 
Passed by the Commissioner of Central Excise And Customs, Vadodara-II

Date of Hearing: 04.01.2018
Date of Decision: 13.02.2018

M/s SHREENATH PLASTOPACK PVT LTD
RAJKISHORE CHATURVEDI

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
VADODARA-II

Appellant Rep by: None
Respondent Rep by: 
Shri J Nagori, AR

CORAM: M V Ravindran, Member (J)

CX – The entire order of Adjudicating Authority, for the confirmation of demand on clandestine removal of goods is based upon the two chit books recovered during visit of the officers to main assessee’s factory premises – It is surprising to note that the investigating authorities did not record any statements of any of the directors or any other person from the management to arrive at a conclusion to hold that there was a clandestine removals, it is not fathomable mind of investigating authorities, in not recording the statement of director, is in itself enough to hold that the charge of the clandestine removal is not proved conclusively – The confirmation of demand on clandestine removal on solely a single statement of authorised signatory is totally incorrect and the main assessee was seeking cross examination of this gentlemen which were not offered to – The confirmation of demand under charge of clandestine removal is unsustainable – Secondly, it is undisputed that the chit books on which reliance is placed by Adjudicating Authority, in the denovo adjudication, contained details of names and addresses of recipients of the alleged clandestinely removed goods and the inputs – It is to be noted and surprisingly that Revenue Authorities /Investigating Authorities did not find time to record statement of any of the purchasers of final products/inputs allegedly cleared in a clandestine manner by main assessee – In absence of such corroborative evidence, the demand is not sustainable – Further, Revenue Authorities/Investigating Authorities have not brought on record as to whether and how the main assessee had received the consideration for alleged clandestine removal of inputs and finished goods – In the absence of any consideration being shown to have been received by main assessee, the allegation of clandestine removal fails – The demand of duty liability of Rs. 12,26,279/- with interest and penalty of Rs. 32,28,541/- is unsustainable – Since the demand is set aside, no reason found to sustain the confiscation of land, building, plant and machinery, accordingly the same is set aside – As regards the penalty on director, in entire proceedings the Adjudicating Authority has not pointed out any role that could be attributable to Shri Rajkishore Chaturvedi for visiting him with penalty of Rs. 10 lakhs under Rule 209A of CER, 1944 – As the entire demand raised against the main assessee is set aside, no penalty can be imposed on the director: CESTAT

Appeals allowed

Case laws cited:

CCE Vs. Saakeen Alloys Pvt. Ltd – 2014-TIOL-739-HC-AHM-CX… Para 8

CCE Vs. Gopi Synthetics Pvt. Ltd – 2014-TIOL-2294-HC-AHM-CX… Para 8

FINAL ORDER NOS. 10363-10364/2018

Per: M V Ravindran:

These two appeals are directed against Order-in-Original No. 18/VDR-II/MP/ADJ/SHREENATH PLASTO/D-WAG/COMMR/2010 dated 15.12.2010.

2. The relevant fact that arise for consideration, after filtering out unnecessary details are the factory premises of Shreenath Plastopack Pvt. Ltd., (main appellant) was visited by the officers and during the visit stock was challenged, it was noticed that there was shortage of final products and shortage of raw materials. On being pointed, the amount of duty involved on shortage of finished goods and shortage of raw materials was discharged by the main appellant before issuance of the show cause notice. Subsequent detailed investigation culminated in issuance of show cause notice to the appellant for demand of Central Excise duty arrived at, as being payable on the alleged clandestine removal of the goods, tabulating the details from the two chit books which were found during the surprise visit of the officers. Adjudicating Authority, after following due process of law, confirmed the demands raised along with interest and also imposed penalties on main appellant and another appellant. Aggrieved by such an order, appeals were preferred to the Tribunal in appeal No. E/617-619/99-Mumbai which were disposed of by this Bench by an order No. CB/686-688/WZB/04 dated 19.05.2004 and remanded for reconsideration by the Adjudicating Authority. The part which was remanded by the Bench was to correlate and reconcile the entries with chit books with duty paid clearance of goods; directed the adjudicating authority to follow the principle of natural justice before coming to a conclusion. The impugned order in these appeals is passed in remand proceedings after following principles of natural justice and the adjudicating authority in the impugned order has confirmed the demand of Rs. 12,26,279/- with interest and imposed Rs. 32,28,541/- as penalty, ordered for confiscation on land, building, plant and machinery of the main appellant and also imposed a penalty of Rs. 10 lakhs on the individual appellant being the director of the company. The Adjudicating Authority has recorded findings considering reconciliation submitted by the appellant to him during the personal hearings. The Adjudicating Authority submitted that appellants claim of discharge duties 48 entries is acceptable and remaining balance 81 entries an explanation was given was not satisfactory. The Adjudicating Authority held that the main appellant had clandestinely removed the goods.

3. None appeared on behalf of the appellant despite notice. Since the matter has been coming up for disposal regularly, the same are taken up for disposal even in the absence of any representation from the appellants.

4. Heard the Learned Departmental Representative, who submits that the Adjudicating Authority has clearly recorded that the two chit books which were recovered during the visit of officers, explained clandestine nature and the shortage of raw materials removed. It is his submission that having not retracted the statements given by Mr. Satish Bhavsar, Authorised Signatory who admitted clandestine removal of the goods the Adjudicating Authority’s order needs to be upheld.

5. On careful consideration of submissions made by Learned Departmental Representative and on perusal of records, I find that the entire order of the Adjudicating Authority, for the confirmation of demand on clandestine removal of the goods is based upon the two chit books recovered during the visit of the officers to main appellant’s factory premises. I perused the copies of chit books recovered and copies thereof annexed to the appeal memorandum. It is also undisputed these two chit books contained information which indicated duty paid clearances also.

6. I find that the Adjudicating Authority has totally misconstrued the provisions of the law and the law as settled by the various decisions of the Tribunal as to confirmation of the demands on clandestine removal. It is now settled law, clandestine removal is a very serious allegation and needs to be corroborated with solid evidence.

7. In the case in hand, I find that the Adjudicating Authority has confirmed the demands only on the basis of two chit books, the statement dated 11.03.1998 of the authorised signatory Mr. Bhavsar. It is also surprising to note that the investigating authorities did not record any statements of any of the directors or any other person from the management to arrive at a conclusion to hold that there was a clandestine removals, it is not fathomable mind of investigating authorities, in not recording the statement of director (who is an appellant herein), is in itself enough to hold that the charge of the clandestine removal is not proved conclusively. Be that as it may, the confirmation of demand on clandestine removal on solely a single statement of authorised signatory is totally incorrect and the main appellant’s were seeking cross examination of this gentlemen which were not offered to. The law is settled on this point as to if no cross examination is granted in respect of a person them the statement cannot be considered as of any evidentiary value. I find that the confirmation of the demand under the charge of clandestine removal is unsustainable.

8. Secondly, it is undisputed that the chit books on which reliance is placed by the Adjudicating Authority, in the denovo adjudication, contained details of names and addresses of recipients of the alleged clandestinely removed goods and the inputs. It is to be noted and surprisingly that Revenue Authorities /Investigating Authorities did not find time to record statement of any of the purchasers of the final products/inputs allegedly cleared in a clandestine manner by main appellant. In absence of such corroborative evidence, I find that the demand is not sustainable. Further, Revenue Authorities/Investigating Authorities have not brought on record as to whether and how the main appellant had received the consideration for the alleged clandestine removal of the inputs and finished goods. In the absence of any consideration being shown to have been received by the main appellant, the allegation of clandestine removal is fails. The judgment of the Hon’ble High Court of Gujarat in the following case squarely covers the issue in the favour of the main appellant

CCE Vs. Saakeen Alloys Pvt. Ltd., [2014 (308) ELT 655] = 2014-TIOL-739-HC-AHM-CX and

CCE Vs. Gopi Synthetics Pvt. Ltd., [2014 (310) ELT 299] = 2014-TIOL-2294-HC-AHM-CX .

The ratio of the above two judgments squarely covers the issue in favour of the main appellant herein. Accordingly, in view of the foregoing, I hold that the demand of duty liability of Rs. 12,26,279/- with interest and penalty of Rs. 32,28,541/- is unsustainable and liable to be set aside and I do so. Since the demand is set aside, I find no reason to sustain the confiscation of land, building, plant and machinery, accordingly the same is set aside.

9. As regards the penalty on the director, I find that, in entire proceedings the Adjudicating Authority has not pointed out, any role that could be attributable to the Shri Rajkishore Chaturvedi for visiting him with penalty of Rs. 10 lakhs under Rule 209A of the Central Excise Rules, 1944. As the entire demand raised against the main appellant is set aside, no penalty can be imposed on the director. Accordingly, the appeal filed by the director is allowed. The impugned order is set aside and the appeals are allowed as indicated herein above.

(Order pronounced on 13.02.2018 in open court)

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