2012 (11) TMI 777 - AT - Central Excise

Cenvat credit in respect of short found clinker - denial of claim on ground of clandestine removal - Held that - As it is for the revenue to establish the case of clandestine removal by production of concrete and tangible evidence apart from loose papers, which on the face of it cannot be related to the appellants business accounts and the sole statement of Director, there is no other evidence to reflect upon the clandestine activities of the appellants. The appellants have also taken a stand that it is beyond their capacity to manufacture more than 1000 MT per month and as such the Revenue s allegation that they cleared more quantity in the month of February, 2004 cannot be accepted. Set aside the confirmation of demand against the appellant and imposition of penalties imposed upon them - in favour of assessee.

Summary

Issues:
1. Shortage of clinker in stock and clandestine clearance of cement.
2. Confirmation of demand and denial of Cenvat credit.
3. Nature of evidence required to establish clandestine removal.

Issue 1: Shortage of Clinker and Clandestine Clearance of Cement
The appellant, engaged in cement manufacturing, faced proceedings due to a shortage of 362.502 MT of clinker in their stock and alleged clandestine clearance of 255 consignments of 2740 MT of cement without duty payment. The appellant argued that clinker shortage was based on eye estimation, not actual weighment, and clinker is only used in manufacturing, not for market sale. Regarding cement clearance, the appellant contended that their plant's capacity limited monthly production to 1000 MT, making the alleged 2740 MT clearance improbable. They claimed that loose slips found were unrelated to cement clearance and might belong to tenants renting factory space for other materials.

Issue 2: Confirmation of Demand and Denial of Cenvat Credit
The authorities confirmed a demand of Rs.6,57,600 for clandestine cement clearance and denied Cenvat credit of Rs.90,626 for the clinker shortage. The Commissioner (Appeals) upheld this decision. However, the Tribunal found the clinker shortage allegations unsustainable due to lack of concrete evidence beyond initial detection. The Tribunal also noted that the loose papers recovered did not conclusively link to the appellant's cement clearance, and the Director's statement alone was insufficient to prove clandestine removal. Consequently, the demand confirmation and penalties were set aside due to insufficient evidence and benefit of doubt in favor of the appellant.

Issue 3: Nature of Evidence for Clandestine Removal
The Tribunal analyzed the evidentiary value of the Director's statement and loose papers in establishing clandestine removal. Emphasizing the need for corroborative evidence, the Tribunal cited legal precedents where mere admissions or recovery of documents were insufficient to prove clandestine activities. The Tribunal highlighted the Revenue's failure to conduct thorough investigations beyond statements, truck numbers, and loose papers to substantiate the allegations. Ultimately, the Tribunal ruled in favor of the appellant, stressing the Revenue's burden to provide concrete and tangible evidence of clandestine activities, which was lacking in this case.

In conclusion, the Tribunal allowed the appeals, setting aside the demand confirmation and penalties imposed on the appellant due to insufficient evidence and failure to establish clandestine removal conclusively. The judgment underscores the importance of concrete evidence and thorough investigations in proving allegations of clandestine activities in tax matters.