Goods kept in Factory not liable to Confiscation in absence of evidence to show attempt to remove Clandestinely without Payment: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that goods kept in a factory are not liable for confiscation in the absence of evidence to show an attempt to remove clandestinely without payment.

M/s. Parot Power Pvt. Ltd., the appellant engaged in the manufacture of ‘Electrostatic Precipitator’ (‘Tar Catcher’), Electromagnets for Liquid /Slurry Applications, Electromagnets for power Applications, Ball Mills for Grinding etc. falling under Chapters 84 and 85 of the First Schedule to the Central Excise Act, 1985. Based on intelligence M/s. P.P is engaged in the manufacture and clandestine removal of excisable goods i.e. Tar Catchers without obtaining Central Excise Registration and without accounting for the same in the statutory records, a team of officers of Anti–evasion Section, Central Excise, Commissionerate, Rajkot, searched the factory premises of M/s. P.P. on 11.10.2013 under panchnama.

During the search, various documents were resumed. Tar Catchers valued at Rs. 25 Lakh which were found in the factory premises at the time of the search, were placed under seizure, under a reasonable belief that the same were manufactured in contravention of the provisions of Central Excise law and would have been removed clandestinely. The search was also conducted at the residential premises of the Shri Anand Rameshbhai Vashadia, Director and two notebooks having date-wise entries and files containing ‘Estimates’ were resumed for further investigation. During the investigation statements of the director were recorded. Subsequently, a show cause notice dated 17.09.2014 was issued by the Deputy Commissioner, Division-II, Rajkot proposing confiscation of seized goods valued at Rs 25,00,000/- and imposition of penalty. 

 The demand for central excise duty was confirmed along with interest and penalty and a penalty under Rule 26 of Central Excise Rules, 2002 was also imposed on the Director of the M/s P.P. and other co-noticee. 

Shri Paresh M. Dave and Shri Parth Advocates appeared on behalf of the appellants and submitted that since 15 entries involving 15 parties/buyers are excluded while issuing show cause notice, the credibility and reliability of the Note Books are lost. Only 5 parties/buyers are arraigned in SCN/Adjudication proceedings and a penalty only on five such persons is imposed; but other parties/buyers are not arraigned at all in the proceedings though duty demand for them also is confirmed. Other 107 parties/buyers have submitted affidavits during adjudication, but such persons were neither called for verification nor were their affidavits accepted.

The statements recorded by the investigating officers are therefore of no evidentiary value, and no central excise demand is sustainable based on such inadmissible evidence. As a perusal of the Note Books shows no clear facts or details about any illicit activities are recorded therein. It was a settled legal position that a serious charge of illicit manufacture and clandestine removal of excisable goods cannot be upheld based on rough jottings in diaries or notebooks, and unsubstantiated and unclear details or figures written in loose sheets, notebooks or diaries.

A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr Raju Member (Technical) observed that the goods were lying within the appellant’s factory. There was no evidence on record to show that there was any attempt to remove those goods clandestinely without payment of duty.

The CESTAT held that the goods in question were not liable to confiscation and set aside the order while allowing the appeal. Shri Paresh M Dave & Shri Parth Rachchh, appeared for the Appellant and Shri Tara Prakash, Deputy Commissioner appeared for the Respondent. 

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