Clandestine Removal Must Be Established with Clear and Corroborated Evidence: CESTAT Rules Private Records, Unverified Shortages Insufficient [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that allegations of clandestine removal must be supported by clear and corroborated evidence, and that private records, unverified shortages, and untested statements cannot be the sole basis for confirming duty demands.

Everest Aluminium Pvt. Ltd., the appellant, is engaged in the manufacture of aluminium circles. A search was conducted at its premises by the anti-evasion unit, which allegedly revealed shortages of inputs and finished goods, along with recovery of handwritten note pads and private records.

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Based on these findings, the department issued a show cause notice alleging clandestine removal of goods without payment of duty and confirmed a demand of Rs. 1.75 crore with interest and penalty. The Commissioner (Appeals) upheld the demand, and the appellant approached the tribunal.

The appellant’s counsel argued that the charge of clandestine removal was based only on assumptions drawn from private records whose authors were unidentified and never examined. They submitted that no corroborative evidence such as excess procurement of raw materials, additional electricity consumption, deployment of extra labour, or identification of buyers was produced by the department.

The counsel argued that the stock verification carried out during the search was unreliable and physically impossible given the volume of goods. They further argued that the statements recorded during investigation lost evidentiary value due to non-compliance with Section 9D of the Central Excise Act, and the private records were inadmissible as the requirements of Section 36B were not followed.

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The revenue’s counsel argued the findings of the lower authorities and maintained that the shortages, documents, and statements collectively established clandestine removal.

The two-member bench comprising R. Muralidhar(Judicial Member) and K. Anpazhakan (Technical Member) observed that clandestine removal is a serious charge that must be proved with tangible and corroborated evidence. It explained that the department failed to produce any supporting evidence such as details of unaccounted raw material, transportation of goods, buyers, or flow of funds.

The tribunal also pointed out that the private records could not be relied upon as they were not authenticated under Section 36B, and the statements could not be accepted as valid evidence due to non-compliance with Section 9D. The stock verification was found unreliable and unsubstantiated.

The tribunal set aside the demand of Rs. 1.75 crore along with interest and penalty and allowed the appeal with consequential relief, holding that mere suspicion based on untested records and statements cannot sustain a charge of clandestine removal.

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