Clandestine Removal Proven Through Private Diary & S.14 Admissions: CESTAT Upholds Excise Duty and Penalty on Tobacco Manufacturer [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal, Allahabad (CESTAT) held that clandestine manufacture and removal of excisable goods stands proved where a privately maintained diary recovered from the factory premises is corroborated by voluntary admissions recorded under Section 14 of the Central Excise Act, 1944, thereby justifying confirmation of duty demand, interest, and penalty on the manufacturer.

M/s Kunwar Bahadur Shri Kishan, the appellant, was engaged in the manufacture of unmanufactured branded chewing tobacco under the brand “Moni Sada.” The case arose from a search conducted at the appellant’s factory premises on 11.01.2010, during which departmental officers recovered a red-coloured private diary titled “Lakshmi Book.” The diary contained detailed entries relating to manufacture, clearance, purchaser-wise quantities, and payments received for chewing tobacco packed in 8 gram and 14 gram pouches.

These clearances were allegedly effected without recording them in statutory registers, without issuing invoices, and without payment of Central Excise duty. Based on the entries in the diary and statements recorded during investigation, the Department alleged clandestine manufacture and removal of substantial quantities of chewing tobacco and issued a show cause notice proposing recovery of duty under Section 11A of the Central Excise Act, 1944, along with interest and penalty.

The adjudicating authority confirmed the duty demand, interest, and imposed penalty on the firm, while also imposing a personal penalty on the partner. On appeal, the Commissioner (Appeals) upheld the duty demand and penalty on the firm but set aside the personal penalty on the partner. Aggrieved by the confirmation of duty and penalty, the appellant approached the Tribunal.

On behalf of the appellant, Advocate Rishi Raj Kapoor, contended that the demand was unsustainable as it was primarily based on a private diary and statements which lacked independent corroboration. He argued that proceedings relating to seizure and confiscation arising out of the same search had earlier been set aside by the Tribunal, and therefore, the present proceedings should also fail.

Further furnished a notarised affidavit disputing any connection between the appellant and the private diary, alleging that the statements relied upon by the Department were not voluntary. Therefore, in the absence of conclusive evidence of clandestine removal, the confirmation of duty and imposition of penalty on the firm were unjustified.

The Revenue, represented by Manish Raj submitted that the recovery of the private diary from the factory premises was duly recorded in the panchnama and was never disputed at the investigation stage. He pointed out that the partner of the appellant had, in statements recorded under Section 14 of the Central Excise Act, 1944, categorically admitted the recovery of the diary, and accepted the correctness of its contents.

Subsequently, threw light on the voluntary deposit as a part of the duty amount by the appellant during investigation, further corroborated the admissions acknowledging clandestine manufacture and removal of excisable goods without payment of duty.

The appeal was decided by Sanjiv Srivastava, Technical Member, dismissed the appeal, ruling that the recovery of the “Lakshmi Book” from the appellant’s premises, coupled with the clear and repeated admissions made by the partner in statements recorded under Section 14 of the Central Excise Act, 1944, constituted strong evidence of clandestine manufacture and removal.

The Tribunal noted that the statements were never retracted at the investigation stage or even before the lower authorities. The Tribunal observed that the appellant had also made voluntary duty payments during the course of investigation, which reinforced the admissions. The Tribunal rejected the belated affidavit disowning the diary and alleging coercion, observing that such a plea was raised for the first time several years after the search and only after a change of counsel, rendering it devoid of credibility.

Further held that once the facts of clandestine removal stood admitted and corroborated by documentary evidence, there was no requirement for the Department to adduce further proof. Accordingly, the Tribunal upheld the confirmation of duty under Section 11A of the Central Excise Act, 1944, along with interest and penalty imposed on the appellant firm under the Central Excise Rules, 2002.

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