By TIOL News Service

ALLAHABAD, JULY 30, 2018: THIS is a Revenue appeal.

The respondent assessee is engaged in manufacture of Branded Laminated Poly Rolls and pouches. Officers of DGCEI searched the premises of three manufacturers of LD film, which is the raw material for the present assessee and based upon the recovery of alleged loose slips entertained a view that the said three raw material manufacturers have supplied the LD film to the assessee, who have utilized the same for manufacture of their final product, without reflecting the same into statutory records and have cleared their final products without payment of duty.

Statements of representatives of the three raw material suppliers were recorded, admitting the fact that LD film in question were manufactured and cleared by them without payment of duty, to the present assessee.

The statement of Managing Director of assessee's firm was also recorded wherein he admitted having placed orders for supply of LD film in question but showed his inability to comment further.

The SCN alleging clandestine manufacture and clearance of goods and demanding CE duty was confirmed by the original authority but the Commissioner(A) set aside the order on the ground that apart from the recovery of loose slips from the premises of the third party read with statements of their representatives and statements of assessee's Managing Director, the revenue has not produced any other concrete evidence to show removal of final products from the assessee 's factory; that the Managing Director of the company had not admitted any clandestine removal but had simplicitor accepted that he had placed orders for purchase of LD film from the said manufacturers.

Aggrieved, the Revenue is before the CESTAT and seeks setting aside of the order-in-appeal.

The Tribunal considered the submissions and observed -

++ Undisputedly, the revenue's case is based upon the recovery of some loose slips from the 3rd party premises. It is well settled law that allegations and findings of clandestine removal are required to be based upon positive evidences produced by the revenue. There is admittedly no such evidence available on record which could show that there was unaccounted production and clearance of final products.

++ The Supreme Court in case of Vishwa Traders Pvt. Ltd. have upheld the order of Gujarat High Court in 2012-TIOL-1087-HC-AHM-CX vide which the order of Tribunal - 2011-TIOL-1890-CESTAT-AHM laying down that in absence of evidence of unrecorded procurement and use of raw material, the allegation of clandestine removal cannot be upheld, was maintained.

++ The burden of proof to establish clandestine removal is on the revenue and is required to be discharged effectively. In the present case, apart from the confessional statement and the recovery of the loose slips from the premises of 3rd party, there is factually no other evidence to indicate any clandestine activity on the part of assessees. Accordingly, no justifiable reasons are found to interfere in the impugned orders.

Both the appeals filed by the revenue were rejected.

(See 2018-TIOL-2328-CESTAT-ALL)