CESTAT Rules, Charge Of Clandestine Removal Is A Serious One Must Have Corroborative Evidences
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Judicial Member Ashok Jindal and Technical Member P. Anjani Kumar, has held that the charge of clandestine removal, being a serious allegation, must be supported by clear and corroborative evidence. The Tribunal set aside duty demands and penalties imposed on the appellants, observing that such allegations cannot be sustained solely on the basis of third-party documents or retracted statements.
The case involved a common investigation initiated by the Directorate General of Central Excise Intelligence based on specific intelligence inputs. A simultaneous search was conducted on 04.07.2013 at the factory and residential premises of M/s Trikoot Iron & Steel Casting Ltd., which was engaged in manufacturing MS girders, TMT bars, rounds, MS ingots, and castings. During the search, certain documents including loose sheets, hard disks, and pen drives were seized. Physical inventory discrepancies were also noted, including shortages and excess of certain materials.
Statements of various individuals associated with M/s Trikoot were recorded during the investigation, though many of these statements were later retracted. Based on documents found at Trikoot’s premises, a further search was conducted at the premises of the appellants, including M/s Shri Parasnath Alloys Pvt. Ltd. However, no shortages, excess stock, or incriminating materials were found at the appellants’ premises. Some documents referencing the appellants were retrieved from Trikoot’s premises, and the appellants were questioned about certain invoices allegedly issued by them.
Despite the absence of any incriminating documents recovered directly from the appellants, show cause notices were issued to both M/s Trikoot and the appellants alleging clandestine removal of goods and demanding excise duty, interest, and penalties. The adjudicating authority confirmed the demands and imposed penalties.
M/s Trikoot had already challenged this order before the Tribunal, which in its decision dated 09.09.2024, held that the documents recovered during investigation from Trikoot’s premises—being electronic records—were inadmissible under Section 36B(4) of the Central Excise Act. Consequently, the demand against M/s Trikoot was set aside.
In the present appeal, counsel for the appellants contended that the entire basis of the case against them rested on documents seized from the premises of M/s Trikoot, which the Tribunal had already deemed inadmissible in M/s Trikoot’s case. It was argued that no corroborative or direct evidence was brought on record against the appellants and that the investigation relied on third-party evidence without independent verification. The appellants also challenged the admissibility of statements recorded during the investigation, particularly those that were subsequently retracted.
The Revenue, however, maintained that some physical evidence and confessional statements linked the appellants to clandestine clearances to M/s Trikoot. It was contended that the documents found at Trikoot’s premises, along with statements by the appellants’ representatives, formed a reasonable basis for the demand. It was further argued that the relationship between the appellants and Trikoot as buyer and seller rendered the documents relevant and not merely third-party evidence.
The Tribunal, after examining the submissions and the record, held that no direct or corroborative evidence had been brought on record by the Revenue to support the allegation of clandestine removal against the appellants. It distinguished the case from precedents cited by the Revenue, particularly the R.S. Company case [2017 (351) ELT 264 MP], where a chain of corroborative documents existed across the supplier, transporter, and buyer.
Importantly, the Tribunal reiterated that statements recorded during investigation, especially those retracted later, must be tested in accordance with Section 9D of the Central Excise Act. Since this procedural requirement was not followed by the adjudicating authority, the Tribunal ruled that such statements were inadmissible.
The Tribunal emphasized that: "The charge of clandestine removal which is a serious one has not been established by the Revenue with corroborative evidences.”
Noting that the case against M/s Trikoot itself had already been dismissed due to lack of admissible evidence, and in the absence of any substantive proof against the appellants, the Tribunal concluded that the entire basis for the demand and penalties was unsustainable. Accordingly, the impugned order was set aside, and all the appeals filed by the appellants were allowed, along with consequential relief.
Appearance
Shri S.K. Mathur, Advocate for the Appellant
Shri Rakesh Agarwal with Shri R.K. Mishra, Shri Ranjan Prakash Authorized Representatives for the Respondent
Cause Title: M/S Shri Parasnath Alloys Pvt Ltd V Additional Director General (Adjudication)
Case No: Excise Appeal No. 50759 OF 2022
Coram: Hon’ble Mr. Ashok Jindal [Member (Judicial)], Hon’ble Mr. P. Anjani Kumar [Member (Technical)]
[Read/Download order]
