Clandestine removal of goods can not be alleged on the basis of bilties/GRs recovered from transporters

Clandestine removal of goods without payment of excise duty can not be alleged on the basis of bilties/GRs recovered from transporters without conducting any investigation. – HC

ABCAUS Case Law Citation:
ABCAUS 2789 (2019) (02) HC

The respondent-assessee was a company registered under the Indian Companies Act and was engaged in the business of manufacture and sale of of Pan Masala/Gutkha under brand names falling under Chapter Sub-Heading 2404.90 of the First Schedule to the Central Excise Tariff Act, 1985. 

During a search conducted by the Revenue authorities certain bilties and GRs were either recovered from the office of a Forwarding/Tramnsport Agency and from the business premises of othet firms/companies in the same line of business.

On the basis of the aforesaid bilties and GRs it was concluded by the excise department that the Gutlka manufactured by the respondent assessee were transported to various districts through the Forwarding Agency and the same were cleared without payment of Central Excise duty.

On the basis of the alleged recovery of documents, a show cause notice/demand was issued to the respondent assessee by the Director General, DGCEI, DZU, New Delhi. It was also alleged that during the survey at the business premises of the respondent assessee cash was confiscated on the alleged ground that the said money related to be sale proceeds of clandestinely cleared Gutkha. It was further alleged that the assessee could not produce proper documents or records before the Revenue authorities in rebuttal.

The Commissioner, Central Excise and Service Tax had confirmed demand of Central Excise Duty under section 11 A(1) of the Central Excise Act, 1944 (the Act) and equal amount of penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Act. It had further directed for the appropriation of the amount of Rs. 50,00,000/- voluntarily deposited.

 Feeling aggrieved by the order of the Commissioner, Central Excise and Service Tax, Kanpur the respondent assessee preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal which vide the impugned order allowed the appeal and set aside the demand of interest and penalty. 
Against the impugned order the instant appeal was preferred by the Department.

Before the Hon’ble High Court, the assessee alleged that the entire case set up by the department was on the basis of the bilties/GRs alleged to have been recovered from either at the time of search conducted at the business premises of other parties. It has further alleged that the case was based on the statement made by the transport company, and no document had been seized from the business premises of the assessee which could suggest any clandestine removal of Gutkha.

The Hon’ble High Court observed that the entire show cause notice had been based on bilties/GRs claimed to have been recovered from the Forwarding Agency. It was further revealed that the goods transported by the Forwarding Agency, name of the manufacturer, had not been stated on the alleged GRs and its brand name and it was only presumed by the Revenue that wherever no names/brands were mention, the said bilties/GRs should be treated as if the said goods were booked by the respondent-assessee. 

Ut was further noted that the statements of various persons were recorded under duress and all the submissions made therein were retracted by the witnesses and during the cross examination they had also stated that the statements were recorded under pressure by the officers.

The Hon’ble High Court opined that the Tribunal being the last court has also recorded findings of fact that the bilties/GRs which were recovered from the Forwarding/Transport Agency were used for issuing the show cause notice in the present proceedings. The Tribunal after perusal of the records and materials available has recorded findings of fact that the Revenue were using GRs repeatedly for framing charges against various assessees of manufacturers of Gutkha without connecting the GRs with the goods manufactured by the particular assessee on the basis of particulars of goods stated in the GRs.

The Hon’ble High Court also noted that the Tribunal had noticed in the impugned order that there was no investigation conducted about procurement of raw material of allegedly clandestinely cleared goods. The Tribunal had also come to the conclusion that there was no question of clandestine removal of goods without payment of duty. Moreover the bilties/GRs which were recovered from the transporter, and were lying with the Revenue were being used for issuing show cause notice without conducting any investigation. 

In view of the finding of facts recorded by the Tribunal the Hon’ble High Court dismissed the appeal as lacking merit.

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