Clandestine Removal cannot be confirmed merely on the basis of Statement of a Few Transporters: Bombay HC [Read Order]

A division bench of the Bombay High Court has held that the charges of clandestine removal cannot be confirmed on the basis of statement of a few transporters under the provisions of Central Excise Act, 1944.

The Respondent, M/s. Filatex India Ltd, is a company engaged in the manufacture of polyester yarn of different descriptions falling under Chapter 54 of the Central Excise Tariff Act, 1985 and is holder of Central Excise Registration. The department observed that there was a clandestine removal of goods by the manufacturer without payment of central excise duty. It was also alleged that during the inquiry, it was found that in most of the cases the exact amount for which the cheques were issued to Respondent-Company were deposited in cash or by transfer into the bank account of the so-called buyers to facilitate the clearance of cheques. Consequently, penalty was imposed on the respondent.

The CESTAT, on appeal, found that only on the ground that some job workers could not be found or that some of them refused to have done job work, it cannot be concluded that no activity of job work manufacturing of fabrics was undertaken.

Concurring with the above finding, a bench of Justice Dhiraj Singh Thakur and Abhay Ahuja observed that the statement of few transporters that they did not transport the fabric cannot be a ground to hold that no fabric was manufactured as the main job workers have accepted the manufacture of fabric on job work.

“Even the clearance/sale of fabric and duty payment thereupon is not under dispute. There are no evidence that job work charges paid by the Appellant to the job workers flowed back to them. True it is that even if some of the buyers of the fabrics could not be found, it cannot lead to the conclusion that the Appellant did not sell the fabrics to such parties. The Tribunal has found that majority of job workers, i.e. 5 job workers out of 6 investigated, have accepted the job work manufacturing of the fabrics from the Yarn supplied by the Appellant and that no evidence has been adduced to the effect that the Respondent-Company had clandestinely removed the yarn from their factory for sale by evading central excise duty. On these factual findings, the Tribunal has dismissed the Appeal,” the Court said.

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