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Private records alone cannot support allegations of clandestine removal: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT ) bench ruled that only significant evidence supporting the appellant should be used to establish the accusation of clandestine removal.

The appellants’ legal representative argued that the department’s whole case rested on the entries in a notebook that was found during the search. He claimed that the owner of the company was forced to accept the covert removal and pay the money for duty despite the fact that the person who is purported to have made entries in the aforementioned notebook has neither been identified nor his remarks been recorded.

It was further argued that allegations of clandestine removal cannot be made just on the basis of a statement; rather, they must be supported by verifiable, physical proof rather than speculative deductions and presumptions.

The appellants manufacture iron flats, copper and agricultural implements. An investigation was conducted in the appellants’ office and, on the basis of that, a notice was served dated 28.02.2015.

Based on the results of the investigation mentioned above, a show cause notice was issued on February 28, 2015, demanding ₹11,790 in Central Excise Duty, citing the proviso to Section 11A, along with interest, and suggesting a penalty under Section 11AC of the Central Excise Act, 1944.

The order-in-original then confirmed the duty demand and imposed an equivalent penalty under Section 11 AC of the Central Excise Act, 1944.

That the appellant appealed the aforementioned order-in-original to the Ld. Commissioner for Appeals, which appeal was also dismissed by an order dated May 16, 2018, upholding the adjudication order.

The revenue stated that the challenged order had carefully examined the information it had provided and had confirmed the allegation of clandestine removal. The appeal is therefore likely to be turned down.

According to the Appellate Tribunal, the Department’s position is that the appellants engaged in clandestine removal. It was mentioned that the entries in a particular note book that was found on the appellant’s property were the basis on which the department reached this determination.

The Excise Department did not confirm the identity of the notebook’s creator or the veracity of the notes contained therein. According to the appellant’s attorney, a number of errors were also discovered in the investigation and the show cause notice sent to the appellant.

The entries in the notebook were not examined by a handwriting expert, and neither the author of the notebook nor his statement or justification were obtained. A serious charge like clandestine removal cannot be proven without hard evidence, such as the acquisition of raw materials, the use of labour, the use of electricity, the production of excisable goods, the sale of excisable goods, the transportation of excisable goods, the receipt of consideration, etc.

Furthermore, the department has presented no additional evidence beyond the entries in the notebook and the appellant’s declaration. As a result, in these circumstances, the appellant’s statement is not admissible as evidence.

The Hon’ble Bench determined that the department had not presented any additional evidence, not even on a sample basis, to support the aforementioned claim of clandestine removal. As a result, the accusations made by the department are unsupported by the available data.

This makes the contested order unsupportable. With the aforementioned conclusions, the CESTAT annulled the contested ruling and granted the appeal with appropriate remedies.

Ahir Mitra
Ahir Mitra


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