Clandestine Removal Cannot Be Alleged on Assumptions Alone: CESTAT Sets Aside ₹3 Crore Excise Demand [Read Order]

Bhardwaj Steels Private Limited, the appellant, is engaged in manufacturing of M.S. rods and related products. The case is for the period January 2017 to June 2017. A search was conducted on 23.01.2018 at the factory, a hotel connected to director, and also a so-called secret office.

During the search, some private records, documents and electronic data were found. Statements of employees and directors were also recorded. Based on this, department issued show cause notice demanding around Rs. 3.03 crore duty with interest and penalties.

The appellant filed appeal before Tribunal after the adjudicating authority confirmed the demand and penalty.

The appellant’s counsel argued that whole case is based on assumptions and not supported by any real evidence. They argued that no investigation was done from suppliers or buyers. They also argued that there is no proof of extra raw material purchase, no electricity data, no transport details and no proof of receiving money. They argued that private records alone cannot be used without proper support.

The appellant also argued that statements taken during investigation cannot be used because Section 9D procedure was not followed. They argued that those persons were not properly examined before authority. They also argued that electronic data from pen drives and hard disks is not valid because Section 36B conditions not followed. They also argued that stock shortage was only estimated and not properly measured.

The revenue counsel supported the order and argued that documents and statements clearly show suppression and clandestine removal.

The two-member bench of Ashok Jindal (Judicial Member) and K.A. Anpazhakan (Technical Member) observed that clandestine removal is serious charge and must be proved with strong and clear evidence.

The tribunal observed that no proof was given for excess raw material or actual removal of goods. It also observed that no buyers were identified and no proof of money received was shown. The tribunal also observed that no evidence was given for extra electricity use or production capacity. It further observed that transportation of goods was not proved properly.

The tribunal also observed that stock shortage was based on rough estimation and cannot be relied. In view of all this, the tribunal explained that department failed to prove the case. The demand, interest and penalties were set aside and appeal of appellant was allowed.

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