Penalty under Central Excise Act is not sustainable by Third Party Evidence, can’t claim Duty on Clandestine Removal: CESTAT [Read Order]

The Delhi Principal Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the demand of duty and penalty under the Central Excise Act is not sustainable by the third–party evidence.

The appellant is the Director SR Ingots Pvt Ltd. engaged in the manufacture of iron and steel products, which are dutiable and alleged to evasion of duty. On the search of another manufacturer, premises resulted in the recovery of several incriminating documents showing unaccounted purchase and sale of finished goods where, it was revealed that Pankaj Ispatanother manufacturer has procured unaccounted sales from appellant during the period June 2010 to March 2012, without accounting the same in their statutory records.

 Further, the production records also revealed unaccounted production or suppression of production. It was alleged that the appellant had cleared clandestinely 806.506 without paying duty. The summons was issued by the respondent to produce relevant documents and was returned with the remark that- factory is closed. The respondent issued a show-cause notice dated 1 July 2015 on these appellants, claiming the duty evaded of Rs. 22,73,779/- withthe penaltyunder Rule 26.  

The appellant filed an appeal before the Commissioner (Appeals), who rejected the appeal.The appellant contended that the whole demand has been raised with a penalty, based on unsubstantiated third party records. It was further stated that the charge of clandestine removal and demand of duty, have got grave civil consequences on the appellant and allegation in a mechanical manner can’t be sustainable unless it is supported with corroborative evidence.

The Tribunal observed that the Respondenthas failed to examine its witness in the adjudication proceedings and thus for the absence of compliance with the mandate of Section 9D of the Act.

MrAnil Chaudary, Judicial Member, while allowing the appeal has set aside and held that the demand has been confirmed against the appellants with a penalty in a mechanical manner with a lack of corroborative evidence. Shri Vinay K. Jain appeared for the appellant and Shri Ravi Kapoor appeared for the respondent.

To Read the full text of the Order CLICK HERE

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