10 June 2024


Customs, Excise and Service Tax Appellate Tribunal

Agarwal Sponge & Energy Pvt. Ltd. and Ors. Vs. Commissioner of Central Tax, Belgaum Commissionerate




Charge of clandestine clearance cannot be established merely on basis of statement of Director

In facts of instant case, Appellant No. (1) is engaged in the manufacture of sponge iron falling under Chapter 72 of Central Excise Tariff Act, 1985 and was registered under Central Excise Department and are clearing the goods on payment of excise duty. The officers of the DGCEI, conducted investigation and recovered various documents.

After completion of the investigation, Appellants were issued with the show-cause notice by the Deputy Director General of Central Excise Intelligence, proposing to demand Central Excise duty of Rs. 4,69,148 along with interest and also proposed to impose penalties under the provisions of Central Excise Act and the Rules made thereunder.

Appellant filed detailed reply to the show-cause notice and the Assistant Commissioner after considering the submissions of the Appellant vide Order-in-Original confirmed the demand as proposed in the show-cause notice apart from imposing penalties on both the appellants. Aggrieved by the said order, appellant filed two appeals before the Commissioner (Appeals) Belgaum and the learned Commissioner (Appeals) vide the impugned order rejected the appeal of the Appellant No. (1) but in the case of Appellant No. (2), the Commissioner (Appeals) reduced the penalty to Rs. 3,00,000 under Rule 26 of the Central Excise Rules.

The entire case against the Appellant no. (1) was built on the basis of the statement of the Director and there is no other evidence to establish the factum of clandestine clearance. Further, the charge of clandestine clearance cannot be established merely on the basis of statement of the Director who has alleged coercion and undue influence exhorted on him for extracting confession.

Further, consistently Courts have held that, duty demand cannot be sustained solely on the basis of statement recorded during the course of investigation in the absence of corroborative evidences in the form of consumption of electricity, purchase of raw-material, electricity consumption, manpower, capacity of the factory to produce the alleged quantity, mode of transportation and sale of goods, receipt of sale proceeds and other documentary evidences. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."

There is a discrepancy in the quantity of the sponge iron alleged to have been purchased from the appellant. As per the Department, the Managing Director has admitted the duty liability to the extent of 290 MT whereas the duty demand has been confirmed on 293.42 MT of sponge iron which is neither admitted nor corroborated with any documentary evidence.

It is also settled law that allegation of manufacture and clandestine clearance, the burden lies on the Department to prove the charge against the assessee with proper and cogent evidence but in the present case the Revenue has not conducted complete investigation and relied upon merely the statement of the Executive Director and confirmed the duty demand which in view of the decisions cited supra is not sustainable in law. Further, once the demand is not sustainable, penalty is not imposable on the Appellant No. (1) and Appellant No. (2) in view of the decisions in the case of Jindal Praxair Oxygen Co. Ltd. Vs. CCE and Goa Bottling Co. Ltd. - Vs. CCE - 2006 (206) E.L.T. 950. The impugned orders are not sustainable in law and therefore both the impugned orders are set aside by allowing the appeals of the appellants.


Jindal Praxair Oxygen Co. Ltd. Vs. CCE - MANU/CB/0133/2007
, Goa Bottling Co. Ltd. - Vs. CCE

Tags : Demand Confirmation Legality

Share :