The Ahmedabad Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that clandestine removal cannot be established on the basis of a third party’s records.
The appellants are engaged in the process of obtaining goods and materials by breaking ships, boats, and other floating structures. DGCEI gathered intelligence that indicates that most of the shipbreaking units are engaged in large-scale evasion of Central Excise Duty. DGCEI conducted the coordinated search operations of some of the major brokers, transporters, transport agents,s and sales brokers.
In the comparison of booking registers of transport agents, it was found that in respect of some of the entries made in such booking registers, invoices were not issued and it was alleged that the goods of entries made in the registers for which no excise invoices were issued have been removed clandestinely. After completion of the investigation, show cause notices were issued to the appellants and also other persons such as transporters, transport agents, and sales brokers. On consideration of the appellants’ replies, the adjudicating authority rejected their defense and confirmed the duty demand. The Commissioner (Appeals) confirmed the duty, hence preferred appeal before CESTAT.
The appellants submitted that the Broker may have booked a vehicle, on account of cancellation of orders by the buyers or any other reasons the vehicle though earlier booked is not loaded with the goods from the appellants’ plot but may go to some other plot and hence no Central excise Invoice is issued by the appellants in respect of vehicle so booked. Thus clandestine removal cannot be established on the basis of the entries in the booking registers of transport commission agents. The appellant further submits that it is settled law that clandestine removal cannot be established on the basis of a third party’s records.
The Tribunal observed that It is well-settled law that there has to be some evidence in the form of receipt of raw materials, shortage of raw materials, clandestine manufacture including use of electricity, excess or shortage of inputs found in the stock, flow back of funds, purchase of final products by parties alleging receipt and removal of goods and any such evidence which would show clandestine manufacture of goods. Mere entries in third parties’ records of Transporters and brokers cannot be the basis for clandestine removal.
The Coram of Mr. Ramesh Nair, Judicial Member, and Mr. Raju, Technical Member while allowing the appeal has held that “Revenue has failed to produce any corroborative evidence. The evidence, at best, raises suspicion in the minds but is not sufficient to prove the charges of clandestine removal. In the absence of any corroborative evidence, the benefit of the doubt goes in favor of the appellant. In these circumstances, we hold that Revenue has failed to prove their case”.
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