The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled the investigation faulty due to the department failing to verify the veracity of documents with key parties like suppliers, buyers, transporters, agents etc,.
Devender Kumar (appellant), director of Shree Krishna Laxami Steel Udyog Private Limited, engaged in the business of steel manufacturing etc,. The department found incriminating documents while conducting a search operation in the premises of the appellant.
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The department issued a show cause notice to explain the allegation that the appellant engaged in the activity of clandestine manufacture and removal of goods without record. The department also observed that the documents sought were not submitted by the appellant.
Therefore it was concluded by the department that the appellant did not cooperate with the investigation. Therefore, the department confirmed the Excise Duty and imposed penalties upon the appellant for suppression of facts with intent to evade Excise duty. Aggrieved by the order the appellant filed an appeal before CESTAT.
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The counsel for the appellants submitted that the case was decided based on the documents recovered from the Sati Ram who claims to be accountant of appellants in the premises of the appellants.
The counsel for the appellants also contended that the sole basis for confirming the demand of Excise duty was based on the documents recovered from the Sita Ram. The counsel further contended that the documents were not verified despite the details found in the recovered records. Therefore, the counsel argued that the demand was confirmed based on unverified documents which was not sustainable in law.
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On the other hand, the counsel for the revenue submitted that the documents were recovered from the employees of the appellant company. The counsel also contended that Sati Ram made statements that these documents belong to the appellant company. Therefore the counsel for the revenue justified the demand against the appellants.
The two-member bench comprising Ashok Jindal (Judicial Member) and Rajeev Tandon (Technical Member) observed that the department recovered documents to allege the appellant engaged in clandestine manufacture and removal of goods.
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The tribunal further observed that the department failed to verify the veracity of documents with key parties like supplier of raw materials, buyer of finished goods, transporter, commission agent etc,. despite the details of the parties available on the documents.
Therefore, the tribunal held the whole investigation was faulty and quashed the demand order and set aside the penalty imposed on appellants.
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