In a recent ruling the Delhi High Court observed that clandestine removal and under-valuation charges is not sustainable on ground of assumptions and presumptions.
The Commissioner of Central Excise held that total central excise duty demand of Rs. 4,18,29,655/- (Rs. 3,47,22,118 + Rs. 71,07,737/-) on account of clandestine removal and undervaluation of goods was confirmed against KI under proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Rule 11 AB.
The respondent filed the appeal against the order of the Commissioner before the Central Excise Service Tax Appellate Tribunal ( CESTAT ). In the appeals filed by the respondents before the CESTAT, there was a difference of opinion between the members who heard the appeals. On reference to a third member, the appeal was allowed.
The department has been filed the appeal under Section 35 (G) of the Central Excise Act, 1944 against Order passed by the CESTAT by which the appeal of the respondents was allowed.
The counsel for the Revenue argued that the absence of tangible evidence does not diminish the weight of the substantial information contained in the recovered documents. It is thus submitted that the cumulative evidence including the statements, document correlations and physical findings form a robust case against the respondents. It is stated that the authenticity of the recovered documents holds firm and attempts to discredit them, lack merit.
The counsel of the respondents has supported the majority view of the CESTAT, arguing that Revenue has failed to prove the allegations and consequently the demand of dues and penalties. It has been argued that the statements recorded under Section 14 of the Central Excise Act are not voluntary. The statements were later retracted by the respondents and therefore prudence demands that such retracted statements should not be accepted without independent corroboration.
A Division bench of Justices Ravinder Dudeja and Yashwant Varma observed that “The charges of clandestine removal and under valuation against the respondents in this case cannot be sustained merely on the basis of assumptions and presumptions. The absence of direct, credible evidence linking the respondents to the alleged offences necessitate the dismissal of the charges. The decision is grounded on the principles of justice and the requirement for the burden of proof to be satisfactorily met by the party alleging the wrong doing.”
“The allegations of clandestine removal and under valuation as brought-forth by the Revenue were required to be substantiated with tangible evidence rather than being sought to be supported merely on the basis of assumptions and presumptions. Revenue has not presented any direct evidence that unequivocally establishes the respondent’s involvement in clandestine removal and under valuation of the goods” the Court noted.
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