Charge of Clandestine Removal not established merely on the statement of the Proprietor of the assessee-unit without further co-gent evidence.

PJ/Case Laws/2010-11/1094

Case: Union of India v/s M.S.S. Foods Products Ltd

Citation: 2011 (264) ELT 165 (MP)

Issue:-Charge of Clandestine Removal not established merely on the statement of the Proprietor of the assessee-unit without further co-gent evidence.

Brief Facts:-Respondent is a manufacturer of Gutka Pan Masala, Mouth-Freshner, Sweet Supari etc under the brand name of “Shimla”, “Malikchand” and “Vansh”. The Reposnet’s unit was based in Indore.

During search against M/s Kuber Group of Companies on 21.05.2004, the Excise Department detained a container at Chennai containing 40 bags of “Shimla” brand Gutka. The consignment was booked by M/s Vaishali Cargo Carriers, New Delhi consigned to “Self” at Chennai, through M/s Balaji Cargo Forwarders, Delhi which also had an office at Chennai. No documents cobering payment details, transportation details could be produced by M/s Vaishali Cargo Carriers. The Manager of Balaji Cargo Forwarders and Delivery Assistant of Vaishali Cargo Carriers stated that the goods were sent from Delhi to Chennai under the LRs describing the goods as Hardware.

Summons were issued to the Proprietor of Respondent-company. After his statement was recorded, Show cause notice was issued for confiscation of said consignment of Gutka and for payment of excise duty from Respondent on the ground that the Respondent had clandestinely manufactured and cleared the said consignment without payment of duty. Imposition of penalty was also proposed.

The Deputy Commissioner held that there was no evidence to establish that the said 40 bags of Gutka was manufactured and clandestinely removed by the respondent without payment of duty. It was found that the Manager & Delivery Assistant of Balaji Cargo Forwarders have nowhere in their statement stated that the seized goods were delivered and manufactured by the respondent. It was held that Proprietor of respondent-company had nowhere in his statement admitted that they had manufactured and clandestinely removed the said consignment. It was held that it is not established that the said goods were removed without payment of duty. It was also noted that the Proprietor of respondent-company had stated that they had not sold their goods to any Delhi based dealers not they have booked any consignment through Vaishali Cargo Carriers, Delhi. Accordingly, the proceedings initiated against the respondent were dropped.

Revenue filed appeal before the Commissioner (Appeals). The Commissioner (Appeal) upheld the reasoning and finding of the Deputy Commissioner. Therefore, Revenue went in appeal before the Tribunal.

The Tribunal upheld the orders passed by the Lower Authorities. It was held that in the absence of any evidence against the respondent-company, the proceedings for confiscation of goods, demand of duty in respect of the same and imposition of penalty on the respondent has been rightly dropped by the Lower Authorities.

Aggrieved by the said order of the Tribunal, Revenue is in appeal before the High Court.

Appellant’s Contention:- With regard to fastening of liability on the respondent, it was submitted that the Tribunal as well as the authorities have committed an error in dropping the proceedings against the respondent and in not fastening the liability of payment of excise duty and penalty.

Appellant also contended that the Proprietor of Respondent-company had clearly admitted that the company is engaged in manufacture of Gutkha and selling products under the brand “Shimla” and the dispute in the proceedings related to same goods or brand name “Shimla”. On this basis, action was required to be taken against the respondent.

Respondent’s Contention:- Respondent submitted that there is no evidence that they had manufactured and cleared the goods in question without payment of excise duty, therefore, the Tribunal as well as the authorities have not committed any error in dropping the proceedings against them.

Reasoning of Judgment:- The High Court noted that the respondents had taken a clear stand before the Authorities that the seized goods were not manufactured and were not cleared by them without payment of duty. They had stated in their reply to the show cause notice that the seized goods did not belong to them but were probably a duplicate product using their brand name. It was stated that they had never sold there product in Delhi market and the manner the product was packed was different from his mode of packing the product.

The High Court perused the orders passed by the Lower Authorities as well as by the Tribunal.

It was held that the Revenue had failed to point out from material on record that the seized goods were manufactured by the respondent or they were being transported at the instance of the respondent or they were cleared from the factory premises of the respondent clandestinely without payment of excise duty. Revenue failed to point out any evidence which could attract the levy of excise duty or penalty under the provisions of Acts or Rules against the respondent, in the given facts of the case.

Reliance was placed on judgments given in Oudh Sugar Mills Ltd v/s Union of India [1978 (2) ELT (J172) (SC)], Commissioner of C. Ex., Ludhiana v/s Rakesh Nayyar [2010 (255) ELT 234 (P&H)], State of West Bengal and Others v/s Md Khalil [(2000) Vol 4 SCC 594].

The High Court held that under the Excise Act, the excise duty was leviable on manufactured or production of excisable goods and therefore, for levying the excise duty, it is necessary to establish that the excisable goods was produced or manufactured by the assessee concerned and for attracting Section 11-A, it is necessary to establish that the excisable goods was clandestinely removed without payment of excise duty, which the Revenue has failed to establish in the present case. The excise duty cannot be levied merely on the basis of assumption or presumption.

Accordingly it was held that there is no evidence that the seized goods were manufactured and clandestinely removed by the respondent without payment of duty.

The High Court further held that the statement of the proprietor has clearly stated that he had not manufactured the seized goods. There was no admission by the Proprietor about the manufacture and clandestine removal of the clandestine goods. Therefore, the statement of the Proprietor is not sufficient to initiate the action against the respondent and fasten the liability of excise duty as well as the penalty on respondent without there being any cogent evidence on record establishing the necessary ingredients for levy of excise duty and penalty against the respondent.

It was also observed that statement of the Proprietor was duly noted by the Lower Authorities as well as the Tribunal. Therefore, it cannot be held that the statement of the Proprietor was ignored by the Tribunal while affirming the order of the Lower Authorities.

All questions of law answered against the revenue and in favour of the respondent-assessee.

Decision:- Appeal accordingly, dismissed.

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PJ/Case Laws/2010-11/1094

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