The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, has set aside a central excise duty demand of Rs. 2.16 crore after finding that the department’s case hinged entirely on unverifiable private documents seized during a 2012 search operation.
The bench of Justice R. Muralidhar (Judicial) and Rajeev Tandon (Technical) ruled that records, written in pencil by unidentified persons and unsupported by corroborative evidence, could not be relied upon to establish clandestine removal of excisable goods.
The bench stated that mere tallying of some diary entries with electricity bills or bank statements was insufficient to allege tax evasion.
The Appellant/assessee is a manufacturer of Mild Steel Ingots falling under Sub Heading 7206.10.90. They use Sponge Iron, Pig Iron, Cast Iron etc. as raw materials.
The Officers of DGCEI conducted simultaneous search operations at their Factory-cum-Office premises and Residential premises of one Shri Surendra Prasad Gupta, Brother-in-law of Shri Musafir Jaiswal, and also at other premises.
One Spiral Binding Pocket Diary was seized purportedly from [Directors Chamber (Panchanamas Page 204, Vol.-II)]. Delible Pencil Handwritten loose sheets, (Trial Balance as per the Revenue) were seized from the residence of Sri Surendra Prasad Gupta, Brother-in-Law of Sri Musafir Jaiswal, Director (Panchanamas Page 181, Vol.-II). In the course of said search operation, the physical stocks of raw materials and finished goods were taken and no excess/only shortages of stocks were detected.
Statements were recorded from various persons and a Show Cause Notice was issued on 27.01.2016 alleging that the appellant has cleared 5816.660 MT of M.S. Ingots of the value of Rs.19,13,71,626/- involving Central Excise duty of Rs.2,16,46,337.After due process, the Adjudicating authority confirmed the demand along with interest and penalty. He also imposed a penalty on the Director of the company.
The issue before the tribunal was whether loose sheets and a spiral-bound diary seized during investigations could be treated as credible evidence for alleging illegal clearance of 5,816.66 MT of Mild Steel Ingots.
The tribunal concluded that the documents were neither signed nor authenticated. They lacked consistency, showed no excess stock or raw materials, and had no link to actual transportation or buyer records. No cross-examination of key witnesses was permitted, violating Section 9D of the Central Excise Act.
The tribunal held that the burden of proof lay with the department, which failed to provide concrete evidence like purchase of extra raw materials, extra labour, or unaccounted transport activities. The “Trial Balance” seized was handwritten in pencil, inconsistent, unsigned, and contained figures that didn’t match accounting standards.
Along with quashing the excise demand, the tribunal also struck down the penalty imposed on the company’s director, finding no admission of wrongdoing or participation in any illicit activity.
Case Details
Case Title: M/s DD Iron & Steel Pvt. Ltd. Versus Commissioner of CGST & Central Excise
Case No.: Excise Appeal Nos. 76871-76872 of 2016
Date: 14.07.2025
Counsel For Appellant: K. Kurmy
Counsel For Respondent: S. Dey
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