2013 (3) TMI 499 - AT - Central Excise

Clandestine removal of Cenvat credit availed inputs without reversal of the Cenvat credit - demand confirmed - Held that - The only basis of the demand raised is that while in some cases, in the monthly statements to bank regarding stock of raw material, the appellant were showing some stock in the RG-23A Pt. I register there was nil stock in other cases, the stock of Cenvated inputs reflected in RG-23A Pt. I register was less than the stock of inputs reported in statements to the bank. As other than this discrepancy, there is absolutely no evidence of removal of the Cenvated inputs to anybody. For the entire period of dispute, there is no evidence that the officers had conducted physical stock taking of the Cenvated inputs and had detected shortage in respect of the same. Thus the case against the appellant is not sustainable. The impugned order is set aside. The appeals as well as stay applications are allowed.

Summary

Issues:
1. Allegation of clandestine removal of Cenvat credit availed inputs without reversal or payment.
2. Confirmation of demand of Cenvat credit, interest, and penalties by the Jurisdictional Commissioner.
3. Appeal against the order-in-original dated 4-4-2012.

Analysis:
1. The appellant, a paint manufacturer, availed Cenvat credit for inputs used in manufacturing their final product. The department alleged clandestine removal of Cenvat credit availed inputs based on discrepancies in stock records during an audit for the period 2006-2007 to 2009-2010. The Jurisdictional Commissioner confirmed a demand of Rs. 54,34,152/- against the appellant firm, along with interest and penalties. The appellant contested the order, arguing that the conclusion of clandestine removal was solely based on monthly stock statements submitted to the bank, lacking substantial evidence such as buyer examination or invoice analysis. The appellant explained the stock discrepancies as a method to secure more credit from the bank. The Tribunal found the case unsustainable due to the absence of concrete evidence supporting clandestine removal, setting aside the impugned order and allowing the appeals and stay applications.

2. The appellant's counsel contended that the impugned order lacked sustainability as it primarily relied on monthly stock statements to allege clandestine removal without substantial evidence. The department defended the order, asserting that the appellant had removed Cenvat credit availed inputs without reversing the credit, though acknowledging the lack of significant evidence beyond the stock discrepancies. The Tribunal noted that apart from discrepancies in stock records, there was no concrete proof of removal of Cenvat inputs. No physical stock-taking had been conducted to detect shortages during the disputed period, leading to the conclusion that the case against the appellant was not tenable. Consequently, the impugned order was set aside, and the appeals, along with stay applications, were allowed.

3. The Tribunal carefully considered the arguments presented by both parties and reviewed the records before concluding that the case against the appellant lacked substantial evidence to prove clandestine removal of Cenvat credit availed inputs. The absence of concrete proof beyond discrepancies in stock records led to the decision to set aside the order-in-original dated 4-4-2012, confirming the demand against the appellant. The Tribunal emphasized the importance of substantial evidence in such cases and ruled in favor of the appellant, allowing the appeals and stay applications for final disposal.