2014 (2) TMI 1325 - AT - Central Excise

Clandestine removal - shortage of stock - Held that - apart from shortages, there is no other evidence on record corroborating the allegation of removal of either the raw material or the final product. In such a case, the appellate authority has rightly held that clandestine activities cannot be proved against the assessee - appeal dismissed - decided against Revenue.

Summary

Issues: Alleged shortages of raw materials leading to imposition of penalties.

In this case, the Revenue appealed against an order passed by the Commissioner (Appeals) regarding shortages of raw materials discovered during a visit to the factory of the respondents, who were engaged in the manufacture of MS ingots. The shortages involved a Cenvat credit of Rs. 3,11,143. The authorized signatory of the respondents accepted the shortages, attributing them to discrepancies in weighment processes. The original adjudicating authority confirmed the shortages and imposed penalties, but the Commissioner (Appeals) later set aside this order, prompting the Revenue's appeal.

The Commissioner (Appeals) based their decision on the lack of tangible evidence supporting the allegations of clandestine removal of raw materials. They emphasized the necessity for the department to provide sufficient corroborative evidence for such serious charges, including evidence of sale of raw material, clandestine manufacture, financial transactions, or transport documents. As no such evidence was presented, the Commissioner (Appeals) concluded that the charges of clandestine removal were not proven. They highlighted the absence of essential ingredients under section 11AC of the Central Excise Act, 1944, and cited case law to support their decision.

Upon reviewing the grounds of appeal by the Revenue, the Tribunal found that besides the reported shortages, there was no additional evidence corroborating the alleged removal of raw materials or final products. As a result, the appellate authority agreed with the Commissioner (Appeals) that clandestine activities could not be established against the respondents. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the Revenue's appeal.