M/s Goodluck India Limited & Anr. v. Union of India & Ors

GST Update/ 2026-27/0068

CESTAT Sets Aside ?4.62 Crore Demand in Steelex Electrocast Case – Clandestine Removal Not Established Through Proper Evidence
Case Details
In M/s. Steelex Electrocast Private Limited v. Commissioner of Central Goods & Service Tax, Bolpur Commissionerate, Excise Appeal No. E/75395/2020-DB, the CESTAT, Kolkata considered a dispute relating to alleged clandestine manufacture and clearance of M.S. Billets. The appellant was engaged in the manufacture of M.S. Billets falling under Chapter 72 of the Central Excise Tariff Act, 1985. The Department alleged that the appellant had cleared goods without payment of Central Excise duty during the period April 2014 to June 2014 and 25.07.2014 to 01.08.2014.
The investigation included searches at the appellant's premises, the residential premises of its Director, the premises of M/s. SBIW Steels Pvt. Ltd. and the residence of Shri Joydeb Karmakar. The Department relied upon seized brokerage sheets, notebooks, statements of various persons, comparison charts and alleged differences in electricity consumption. Based on these materials, a demand of Rs. 4,62,01,119/-, along with interest and equal penalty under Section 11AC of the Central Excise Act, 1944, was confirmed against the appellant.
Case Law Discussion
The main issue before the Tribunal was whether the evidence relied upon by the Department was sufficient and legally admissible to establish clandestine manufacture and removal. The appellant argued that the statements recorded during investigation under Section 14 could not be relied upon without following the mandatory procedure prescribed under Section 9D. The persons whose statements were relied upon were not examined before the adjudicating authority and the appellant was not given an effective opportunity to cross-examine them. Therefore, according to the appellant, the statements could not be treated as substantive evidence.
The appellant also disputed the seized documents and submitted that the entries relied upon by the Department could be reconciled with Central Excise invoices issued to SBIW and other customers. It was argued that the Department had mainly compared the seized entries with SBIW invoices and had not properly considered invoices issued to other customers. The appellant therefore submitted that genuine duty-paid transactions could have been wrongly treated as clandestine clearances.
The appellant further argued that there was no independent evidence proving clandestine manufacture, such as excess procurement of raw materials, shortage of stock, additional transportation, recovery of unaccounted sale proceeds or confirmation from the alleged buyer regarding receipt of goods without invoices. The appellant also relied upon various judicial decisions, including G-Tech Industries v. Union of India, Amiya Steel Pvt. Ltd., Jai Balaji Industries Ltd., Ramgarh Sponge Iron Pvt. Ltd., Hi-Tech Abrasives Ltd. and Continental Cement Company, in support of its submissions regarding the evidentiary requirements for clandestine removal. The Department, on the other hand, relied upon the findings recorded in the adjudication order and maintained that the statements, seized documents, notebooks, comparison of entries with invoices and electricity-consumption findings supported the allegation of clandestine manufacture and clearance.

Tribunal Decision
The CESTAT, Kolkata held that the statements recorded under Section 14 could not be relied upon as substantive evidence because the mandatory procedure under Section 9D had not been followed. The concerned persons were not examined before the adjudicating authority and the appellant was not provided the required opportunity to test their statements through cross-examination. The Tribunal also held that inability of a person to identify or explain old entries could not, by itself, be treated as an admission of clandestine removal.
The Tribunal further examined the computer-derived evidence and held that the requirements of Section 36B had not been fulfilled. In particular, the required certificate under Section 36B(4) had not been produced. The Tribunal therefore did not accept such material as sufficient evidence against the appellant.
The Tribunal also found that the seized documents did not independently establish clandestine sales. The main seized document was unsigned and unconfirmed, and the Department had not properly established its authorship or connection with the appellant's manufacturing activities. The Tribunal also considered the reconciliation submitted by the appellant with Central Excise invoices and found that the Department had not properly identified and established specific transactions representing clandestine clearances.
The Tribunal emphasised that an allegation of clandestine manufacture and removal requires reliable and corroborative evidence. In the present case, the Department had not sufficiently established excess raw-material procurement, stock shortage, additional transportation, unaccounted sale proceeds or unaccounted purchases by the alleged buyer. The alleged electricity-consumption difference, even if considered, could not by itself establish clandestine manufacture.
Accordingly, the Tribunal held that the Department had failed to establish the allegation of clandestine manufacture and removal. The demand of Rs. 4,62,01,119/-, along with interest and the equal penalty imposed under Section 11AC, was set aside, and the appeal was allowed with consequential relief, if any, as per law.
CA Pradeep Jain_

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