Facts of the Case

  • Searches were conducted on 21 September 2005 at the premises of Vimla Rolling Mills Pvt. Ltd. and its Director.
  • During the search, a panchnama was drawn and unaccounted copper ingots and “kachi parchis” (loose slips) were allegedly found.
  • A Show Cause Notice dated 31 July 2007 was issued.
  • The adjudicating authority confirmed a demand of ₹4.34 crore along with penalty and interest.
  • The respondents appealed before CESTAT, which allowed the appeals and set aside the demand.
  • The Department filed appeals before the Delhi High Court under Section 35G.

Issues Involved

  1. Whether reliance on seized slips (“kachi parchis”) is sufficient to establish clandestine manufacture and removal.
  2. Whether statements recorded during investigation, later retracted, can be relied upon.
  3. Whether the findings of CESTAT suffered from perversity warranting interference under Section 35G.

Petitioner’s Arguments (Department)

  • The seized slips indicated:
    • Daily production (in metric tonnes)
    • Stock of ingots
    • Consumption of furnace oil
  • Statements of key personnel supported the Department’s interpretation.
  • The slips formed the basis for duty demand exceeding ₹4 crore.
  • The Department contended that CESTAT erred in rejecting this evidence.

Respondent’s Arguments

  • The statements relied upon were retracted, alleging coercion and threat of arrest.
  • The evidence based on slips was unreliable and lacked corroboration.
  • Statements of witnesses contained contradictions, making them unreliable.
  • No independent evidence supported allegations of clandestine removal.

Court Findings / Order

  • The High Court upheld the findings of CESTAT.
  • It observed:
    • The appreciation of evidence by CESTAT was not perverse.
    • Contradictions in statements rendered them unreliable.
    • Retracted statements could not be safely relied upon without corroboration.
  • The Court held that no substantial question of law arose under Section 35G.
  • Appeals were dismissed.

Important Clarification

  • Mere reliance on loose slips or private records without corroborative evidence is insufficient to sustain excise duty demands.
  • Retracted statements require strong independent corroboration.
  • High Courts will not interfere with CESTAT findings unless perversity or substantial question of law is established.

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8823-DB/SMD11082017CEAC232017_164928.pdf

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