Clandestine Removal Demand Set Aside For Lack Of Proof | CESTAT

Case Details: Premier Power Products (CAL) Pvt. Ltd. vs. Commissioner of Central Excise, Haldia (2025) 37 Centax 222 (Tri.-Cal) 

Judiciary and Counsel Details

• S/Shri R. Muralidhar, Member (J) & Rajeev Tandon, Member (T)
• Shri Indranil Banerjee, Advocate, for the Appellant.
• Shri P.K. Ghosh, Authorized Representative, for the Respondent.

Facts of the Case

The assessee, being the appellant-assessee, was proceeded against by the department, alleging clandestine manufacture and removal of excisable goods, primarily on the basis of a diary and certain loose notes recovered during investigation, which purportedly contained details of buyers. It was contended by the assessee that the department had not contacted or examined any of the alleged buyers mentioned in such records, nor was there any allegation or evidence of recovery of private records evidencing receipt of clandestine sale proceeds in cash. The assessee further submitted that no evidence was brought on record to establish clandestine procurement of raw materials, excess consumption of electricity, inward movement of raw materials or consumables, or outward movement of finished goods alleged to have been removed clandestinely. It was also pointed out that the sole reliance of the department was on statements of the Director recorded on three occasions, the first being on the date of the search and the subsequent two statements having been recorded after a gap of more than two years. The matter was accordingly placed before Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

CESTAT Held

The CESTAT held that the onus to establish clandestine manufacture and removal rested entirely on the department and that such allegations must be supported by cogent and corroborative evidence. The Tribunal held that recovery of a diary or loose papers, in the absence of verification of buyers or supporting evidence such as proof of clandestine procurement of raw materials, excess electricity consumption, movement of goods, or flow of consideration, was insufficient to sustain a demand under Section 11A of the Central Excise Act, 1944. It further held that statements of the Director, particularly when recorded after a considerable lapse of time and not corroborated by independent evidence, could not by themselves form the sole basis for confirming the demand. The Tribunal therefore held that the department had failed to prove clandestine manufacture and clearance of goods, and accordingly, the demand on account of alleged clandestine removal was not sustainable.

List of Cases Cited

• A.R. Shanmughasundaram v. CESTAT, Chennai — 2022 (380) E.L.T. 151 (Mad.) — Relied on [Paras 17, 18, 22]
• Ambica Iron & Steel Pvt. Ltd. v. Commissioner — 2022 (380) E.L.T. 351 (Tribunal) — Relied on [Paras 4, 17, 18, 21, 22]
• Ambika International v. Union of India — 2018 (361) E.L.T. 90 (P & H) — Referred [Para 8]
• Commissioner v. Anand Founders and Engineers — 2016 (331) E.L.T. 340 (P & H) — Referred [Para 6]
• Commissioner v. Gautam Ferro Alloys — 2022 (380) E.L.T. 385 (S.C.) — Relied on [Paras 4, 17, 18, 22]
• Gautam Ferro Alloys v. Commissioner — 2021 (377) E.L.T. 776 (Tribunal) — Relied on [Paras 4, 17, 18, 22]
• Jai Balaji Industries Ltd. v. Commissioner — 2021 (378) E.L.T. 674 (Tribunal) — Relied on [Paras 6, 21, 22]
• Lovely Food Industries v. Commissioner — 2006 (195) E.L.T. 90 (Tribunal) — Relied on [Paras 26, 27]
• Narsingh Ispat Ltd. v. Commissioner — Final Order Nos. 75556-75557/2024, dated 21-3-2024 by CESTAT, New Delhi — Referred [Paras 4, 8]
• Scan Sponge Iron Ltd. v. Commissioner — 2022-TIOL-817-CESTAT-KOL — Referred [Para 6]
• Super Smelters Ltd. v. Commissioner — 2020 (371) E.L.T. 751 (Tribunal) — Relied on [Paras 4, 17, 18, 21, 22]