Clandestine Removal Charge Fails Without Proof & Section 9D Compliance

Centax Editorial Board

February 20, 2026

• 7 min. read

Case Details: Geetham Steels Pvt. Ltd. vs. Commissioner of GST & Central Excise, Salem (2025) 36 Centax 41 (Tri.-Mad)

Judiciary and Counsel Details

Ajayan T.V., Member (J) & Vasa Seshagiri Rao, Member (T)
S/Shri S. Durairaj, M. Karthikeyan, Ms P. Varshini, S. Venkatachalam, M.A. Mudimannan, M. Kannan & R. Balachandar, Advs., for the Appellant.
S/Shri Sanjay Kakkar & Anoop Singh, Authorised Representatives, for the Respondent.

Facts of the Case

The assessee was engaged in the manufacture of MS ingots and was alleged to have clandestinely manufactured and cleared goods without accounting for them, and to have availed ineligible Cenvat credit. The allegation was principally based on data recovered from pen drives, CPU and hard disk during the investigation. It was alleged that there was a clandestine removal of MS ingots and wrongful availment of Cenvat credit. The assessee contended that the investigation suffered from glaring gaps and lapses, as no evidence was brought on record regarding unaccounted procurement of raw materials, excess consumption of fuel or electricity, labour deployment, or examination of the production capacity of the factory. The assessee further pleaded non-compliance with Section 9D(2) of the Central Excise Act, 1944, on the ground that deponents were not examined, and violation of Section 36B of the Central Excise Act, 1944, read with Section 79A of the Information Technology Act, 2000, in relation to electronic evidence. The matter was accordingly placed before the Tribunal.

CESTAT Held

The Tribunal held that the standards of evidence in matters of clandestine removal are ‘clear and convincing evidence’. It was held that there was no ‘clear and convincing evidence’ to establish clandestine removal and Cenvat credit availment without receipt of inputs. The investigative procedure’s credibility regarding data retrieval from pen drives, CPU and hard disk was found to be irrevocably tarnished, and adverse inference against the investigation had to be drawn as best possible evidence contemporaneously available and easily accessible for conclusive results was either not examined or, if examined, not pursued to a logical end. The Tribunal further held that Section 9D(2) was violated and that Section 14 statements could not be relied on without following the mandate of Section 9D; reliance on untested statements was not sustainable and rendered the clandestine removal case unsustainable.

List of Cases Cited

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