Absence Of Check-Post Stamps Not Proof Of Clandestine Removal: CESTAT Mumbai

The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that a mere absence of check-post stamps on transportation documents cannot create a presumption that goods were not transported.

A Bench comprising Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban observed:

".....that only for the reason that the check-post documents were not produced or were incomplete, it does not mean that the goods were not transported as the documents like Bilty, statements of suppliers, supporting supply of goods to Shri Malu and M/s SVPMIPL are available on record. Hence, only for the reason that Form No. 402 showing transportation of goods was not presented, it cannot be assumed that the goods were not received by Shri Rajendra Malu or M/s SVPMIPL."

The case arose from a search conducted by Central Excise officers at a farmhouse in Kolhapur, where the alleged illicit manufacture of gutka and pan masala was suspected.

The Department seized pouch packing machines, raw materials, and finished goods, and alleged that the main appellant, along with various entities including Zemini Marketing Company and transporters, were involved in clandestine manufacture and removal of excisable goods.

The Department imposed substantial duty demands and penalties based on statements, transport documents, and alleged discrepancies, including the absence of an authenticated Form 402 under the Gujarat VAT Act.

Its case largely relied on the contention that goods purportedly supplied by entities like Zemini Marketing Company were not actually transported, as the check-post forms did not bear official stamps. It was further alleged that the appellants had colluded in the illicit manufacturing and clearance of gutka prior to the declared date of installation of machinery.

The Bench found that the Department failed to substantiate its allegations with credible evidence. It noted that transport of goods was supported by invoices, transport receipts, and statements of suppliers, and that merely because check-post documents were not stamped or were incomplete, it cannot be concluded that goods were not transported. The Bench observed that it is common for transporters to avoid check-posts, and the absence of stamps cannot override other evidence on record.

The Tribunal further held that the allegations of clandestine manufacture were not sustainable, particularly when evidence showed that machinery was installed only on 16 May 2011 and production prior to that date was not established. It also noted that reliance on statements without granting cross-examination violated principles of natural justice, rendering such evidence unreliable.

Holding that the Department failed to prove illicit manufacture, transport, or clearance of goods, the Tribunal set aside the penalties imposed on Zemini Marketing Company and other co-appellants.

Referring to precedent, the Bench noted that “mere absence of check-post stamps on the documents, it cannot be said that the goods were not transported.”

Accordingly, it granted consequential relief to the appellants.

For Appellant: J.C. Patel, Advocate

For Respondent: Shambhoo Nath, Special Counsel