The judgment emphasizes the need for substantial evidence and the burden of proof in cases of alleged clandestine removal, highlighting the requirement to prove facts with a degree of probability.

JUDGMENT :

ABHAY AHUJA, J.

1. By this Appeal, filed under Section 35G of the Central Excise Act, 1944, the Appellant - Principal Commissioner of Central GST & C. Ex., is impugning order No.A/10670-10673/2019 dated 11th April, 2019 passed in Appeal No.E/1227/2011 by the CESTAT, West Zonal Bench, Ahmedabad.

2. The Respondent, viz., M/s. Filatex India Ltd., is a company engaged in the manufacture of polyester yarn of different descriptions falling under Chapter 54 of the Central Excise Tariff Act, 1985 and is holder of Central Excise Registration.

3. It is the case of the Appellant-Revenue that during the inquiry conducted by officers of the Central Excise, Surat -I Commissionerate, it was observed that there was a clandestine removal of goods by the manufacturer without payment of central excise duty. It is submitted that during the period 1st April, 2004 to 6th July 2004, Respondent-Company had cleared 1687585.511 kilograms of yarn manufactured at their factory without payment of the duty as well as without any payment to the six job workers for manufacture of grey fabrics and its clearance was from their premises. It is submitted that further investigation revealed that out of six job workers, one job worker, viz., M/s. A A Textiles, Sachin, Surat was not in existence, two job workers, viz., M/s. Rama Filaments Pvt. Ltd., Jolwa, Surat and M/s. Geena Synthetics Pvt. Ltd., Karanj, Surat were not having any machinery to manufacture grey fabrics and their claim that they had got job work manufacture done could not be established from records as well as from statements of the transporters who claimed to have transported the fabrics from their premises to buyers of the fabrics. It is submitted that one job worker M/s. Mansa Synthetics Pvt. Ltd., Surat failed to produce any documents in support of manufacture of fabrics and its transportation to the customers of Respondent-Company and two job workers M/s. Micro Polyester Pvt. Ltd. and M/s. Goodluck Synthetics Pvt. Ltd. had stated that their records had been destroyed in floods in 2006. It is submitted that summons issued to the buyers of the grey fabrics were returned undelivered except one buyer who denied having purchased any fabrics or having made any transaction with the Respondent-Company.

4. It is submitted that during the inquiry, it was found that in most of the cases the exact amount for which the cheques were issued to Respondent-Company were deposited in cash or by transfer into the bank account of the so called buyers to facilitate the clearance of cheques. That the accounts of the so called buyers of fabrics were opened to regularize the fictitious transaction of sale of fabrics by the Respondent-Company as the element of profit of trading was not reflected in the account as is seen in the normal course of such business.

5. It is submitted that based on the above, a show-cause notice dated 8th June, 2009 was issued by the Commissioner, Central Excise, Vapi, raising a demand of duty of Rs.3,11,76,080/- under Section 11A(1) of the Central Excise Act, 1944 alongwith interest and also a proposal to confiscate goods valued at Rs.10,93,00,281/- with penalty under Section 11AC of the Central Excise Act, 1944 and under Rule 25 of the Central Excise Rules, 2002 with penalty upon Shri Madhav Bhageria, the Joint Managing Director and various officers of Respondent-Company as well as the Director of M/s. Rama Filaments under Rule 26 of the Central Excise Rules, 2002.

6. The show-cause notice was adjudicated and the Order-in-Original No.14/MP/VAPI/2011 dated 22nd June, 2011/7th July, 2011 confirming demand of duty amounting to Rs.3,11,76,080/- alongwith interest and penalty equal to duty demanded under Section 11AC of the Central Excise Act, 1944 came to be passed. Penalties were also imposed on the Joint Managing Director and other officers of the Respondent-Company. The Adjudicating Authority dropped the proceedings to confiscate the goods as well as to impose penalty upon the Respondent-