Why did the CESTAT rule NO CLANDESTINE REMOVAL FOUND even though the department unearthed parallel invoice sets?

Case Name:

M/s. Sharda Rerollers Private Limited and Shri Santosh Kumar Pareek, Managing Director v. Commissioner of CGST, CX & Customs, Rourkela Commissionerate.

Key Takeaways:

1 Lack of Investigation:

The tribunal emphasized the absence of thorough investigation at the end of the buyers mentioned in the parallel invoices and the transporter, highlighting the necessity of comprehensive inquiries in such cases.

2 Contradictory Statements:

The Managing Director’s contradictory statement compared to the employees’ statements raised doubts about the allegations, emphasizing the importance of consistent and corroborated evidence.

3 Violation of Natural Justice:

The tribunal noted the denial of cross-examination of the employees, highlighting it as a violation of the principles of natural justice and referencing a similar ruling by the Hon’ble Apex Court.

4 Corroborative Evidence:

The tribunal stressed the need for corroborative evidence to support the allegations, citing a previous case where the mere existence of two sets of invoices was deemed insufficient to prove the charge of clandestine removal without positive evidence.

Case Synopsis:

An appeal in the Customs, Excise and Service Tax Appellate Tribunal, Kolkata. The case involves Excise Appeal No.76976 of 2018 and Excise Appeal No.76977 of 2018, both arising out of Order-in-Appeal No.48-49/CE/RKL-GST/2018 dated 19.03.2018 passed by Commissioner(Appeals), GST, Central Excise & Customs, Bhubaneswar.

The appellants in this case are M/s. Sharda Rerollers Private Limited and Shri Santosh Kumar Pareek, Managing Director of the company. They are appealing against the Commissioner of CGST, CX & Customs, Rourkela Commissionerate.

The case was heard by HON’BLE SHRI ASHOK JINDAL, MEMBER(JUDICIAL) on 30 January 2024, and the final decision was made on 08, Feb. 2024.

The case revolves around the alleged clandestine clearance of goods and imposing penalties on the appellants.

The departmental officers conducted a search of the factory premises of the appellant on 02.06.2012 and found documents such as Daily Report, three invoices, and waybill. Statements of the employees of the appellant company were recorded, and further investigation was conducted. The Managing Director, Shri Santosh Kumar Pareek, also provided a statement during the investigation.

Appellant contested that the department didn't conduct proper investigation

The appellants contested the matter, arguing that no investigation was conducted at the end of the buyer mentioned in the parallel invoices, and no cross-examination of the employees was given to the appellants. They also highlighted contradictions in the statements provided by the employees and the Managing Director.

After considering the submissions from both parties, the Hon’ble Member (Judicial) found that -

• the case was made out on the basis of rough papers seized during the investigation, which were in the possession of the employees of the appellants.
• However, the Managing Director’s statement contradicted the employees’ statements.
• Additionally, the parallel invoices on the basis of which the demand was confirmed were not examined,
• and no investigation was made with the buyers or transporters mentioned in those invoices.

The Hon’ble Member (Judicial) concluded that

The demand was not sustainable due to the lack of corroboration and the violation of the principles of natural justice. As a result, the impugned demand raised against the main appellant and the penalties imposed on both the appellants were set aside, and the appeals were allowed with consequential relief.

In summary, the appeals were allowed, and the impugned order was set aside, providing relief to the appellants.

FAQ:

Q1: What was the basis for the appeal?

A1: The appeal was based on contesting the demand and penalties imposed for alleged clandestine clearance of goods.

Q2: Why was the demand set aside?

A2: The demand was set aside due to the lack of corroboration, violation of principles of natural justice, and weaknesses in the evidence presented.

Q3: What were the key arguments made by the appellants?

A3: The appellants argued that no investigations were conducted with the buyers and transporters mentioned in the invoices, and there were contradictions in the statements provided by the employees and the Managing Director.

Q4: What is the significance of this case?

A4: This case emphasizes the importance of corroborative evidence and adherence to principles of natural justice in legal proceedings, particularly in matters related to demand and penalties.