Commissioner's Report, Toll Barrier Receipts Shows Manufacturing Activity Verified: CESTAT Rejects Clandestine Removal Allegation [Read Order]
Relying on the decision in Swati Menthol & Allied Chemicals Ltd, the Tribunal held that allegations of clandestine removal must be supported by tangible evidence, not merely inferences.
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has quashed the excise duty demand and ruled that the allegation of non-manufacture based on a third-party investigation could not stand in the face of positive evidence like Toll Barrier receipts and verification reports by the Jurisdictional Commissioner.
Om Sai Ram Industries (appellant) were engaged in the manufacture of Menthol Flakes, Menthol Crystals, and De-Mentholised Oil, availing area-based exemption under Notification No. 56/2002-CE.
The dispute arose following an investigation conducted by the Commissioner of Central Excise, concerning the suppliers of the appellant. The Revenue department alleged that the appellants fraudulently showed procurement of raw materials from non-existent suppliers to claim illegal monetary benefits under the exemption notification without actually manufacturing the goods.
Consequently, the Commissioner confirmed a duty demand of Rs. 95,20,206 along with interest and penalties on the firm and its partner. Aggrieved by the order, the appellant filed an appeal before the tribunal
The counsel contended that the appellant had submitted sale invoices and Lakhanpur barrier toll receipts to substantiate the clearance of goods.
The appellant relied on a report by the JurisdictionalCommissioner dated 21.05.2010, which confirmed that most raw material consignments were entered at the toll barrier and that the District Industry Centre had fixed and verified the manufacturing capacity.
The Bench comprising Mr. S. S. Garg (Judicial Member) and Mr. P. Anjani Kumar (Technical Member) observed that the show cause notice was issued solely based on the presumption derived from the Meerut investigation, without conducting a specific investigation at the appellant's end.
The Tribunal noted that the Jurisdictional Commissioner’s report explicitly stated that Range staff had visited the units for verification of plant and machinery and found nothing adverse. The Bench further observed that the department failed to produce evidence such as electricity disconnection or lack of transportation to prove the cessation of manufacturing.
Relying on the decision in Swati Menthol & Allied Chemicals Ltd, the Tribunal held that allegations of clandestine removal must be supported by tangible evidence, not merely inferences.
The Tribunal held that since the appellant produced evidence of vehicle movement certified by the toll barrier authorities and the department failed to allow cross-examination of witnesses, the demand was unsustainable. The appeal of the appellant was allowed.
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