Case Note & Summary
The Principal Commissioner of Central GST & C. Ex., Daman Commissionerate, filed an appeal under Section 35G of the Central Excise Act, 1944, against order No.A/10670-10673/2019 dated 11th April, 2019 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad. The respondent, M/s. Filatex India Ltd., is a manufacturer of polyester yarn falling under Chapter 54 of the Central Excise Tariff Act, 1985. The Revenue alleged that during the period 1st April, 2004 to 6th July, 2004, the respondent clandestinely removed 1,687,585.511 kilograms of yarn from its factory without payment of central excise duty and without making any payment to six job workers for manufacture of grey fabrics. Investigation revealed that one job worker, M/s. A A Textiles, was not in existence, and two others, M/s. Rama Filaments Pvt. Ltd. and M/s. Geena Synthetics Pvt. Ltd., did not have machinery to manufacture grey fabrics. The CESTAT set aside the demand, holding that the Revenue failed to prove clandestine removal beyond reasonable doubt. The High Court dismissed the appeal, affirming that the Revenue's evidence was insufficient and lacked corroboration, and that allegations of clandestine removal must be proved by positive and cogent evidence.
Headnote
A) Central Excise - Clandestine Removal - Burden of Proof - Central Excise Act, 1944, Section 35G - The Revenue alleged clandestine removal of 1,687,585.511 kg of yarn without payment of duty. The CESTAT set aside the demand holding that the Revenue failed to prove the clandestine removal beyond reasonable doubt. The High Court upheld the CESTAT order, noting that the Revenue's evidence was insufficient and lacked corroboration. (Paras 1-3) B) Central Excise - Clandestine Removal - Standard of Proof - Central Excise Act, 1944 - The court held that allegations of clandestine removal must be proved by the Revenue on the basis of positive and cogent evidence, and mere suspicion or assumptions cannot sustain a demand. The Revenue failed to establish the existence of non-existent job workers or the actual removal of goods. (Paras 2-3)
Issue of Consideration
Whether the CESTAT was correct in setting aside the demand of central excise duty on the ground that the Revenue failed to prove clandestine removal of goods by the respondent-assessee.
Final Decision
Appeal dismissed. CESTAT order upheld.
Law Points
- Clandestine removal
- burden of proof
- preponderance of probability
- circumstantial evidence
- corroboration
- Central Excise Act
- 1944
- Section 35G
