CESTAT Delhi Rules Third Party Transporter Diaries Insufficient to Prove Clandestine Removal

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that third-party transporter diaries are insufficient to prove clandestine removal. The tribunal underscored that transport logs or diaries recovered from external logistics operators do not constitute definitive proof of illicit clearances by a manufacturing unit unless backed by concrete corroborative evidence. When investigating tax evasion, anti-evasion wings frequently seize driver logs or transporter dispatch diaries and impute clandestine movement of goods to manufacturing assessees.

However, judicial oversight has consistently established that transporter records alone are prone to errors, missing context, or multiple interpretations, and cannot replace primary evidence of actual clandestine production. The revenue department bears the heavy burden of proof to demonstrate actual movement of unrecorded goods from the factory gate using independent verification. Tax practitioners should deploy this ruling when handling cases where departmental allegations rest primarily on third-party transport records.

CAs must advise logistics and manufacturing clients to maintain systematic gate-in and gate-out registers to reconcile transport movements against official invoices. Bottom line: Transporter diaries belonging to third parties cannot independently establish clandestine removal without solid corroborative proof.