2013 (7) TMI 565 - AT - Central Excise

Clandestine removal Statement recorded under Section 14 of the Central Excise act, 1944 Held that - Authorised representative whose statement was recorded, himself assumed the weight of sponge iron lying in the stock. I find that authorized representative in his statement, has accepted only shortages detected by the officers and has nowhere accepted that such short found goods stand cleared by them without payment of duty - Shortages cannot be held to be a sole ground for upholding the charges of clandestine removal, without their being any other independent evidence corroborating such allegation - Such shortages detected on assumption basis cannot be held to be having been removed clandestinely Decided in favor of Assesse.

Summary

Issues:
Detection of shortages in final product and raw materials during a visit to the factory, confirmation of demand of duty, imposition of penalty on allegation of clandestine removal, reliance on statement of authorized representative, absence of evidence supporting charges of clandestine removal.

Analysis:
The appellant, engaged in manufacturing MS ingots, faced shortages in final products and raw materials during a Central Excise officer's visit, leading to a duty demand of Rs. 61,000. The authorized representative accepted the shortages and debited the amount in Cenvat credit records. A show cause notice was issued proposing duty confirmation and penalty for alleged clandestine removal, resulting in an order by the adjudicating authority upheld by the Commissioner (Appeals), prompting the current appeal.

The Revenue's case relied on detected shortages during the visit, but the appellant argued that determining exact weight without breaking the product was impossible. No incriminating documents were found, and shortages were based on weight assumptions. The absence of evidence led to the challenge of clandestine removal charges. Reviewing the Commissioner (Appeals) order, it was noted that reliance was placed on the representative's statement and assumption of sponge iron weight. The representative only acknowledged detected shortages, not clearance without duty payment. Established precedent indicated shortages alone couldn't prove clandestine removal without additional corroborating evidence. The shortages, based on assumptions, couldn't support clandestine removal charges, leading to the orders being set aside, and the appeals allowed with consequential relief.

The judgment, delivered by Ms. Archana Wadhwa on 03.07.2013, highlighted the importance of substantial evidence in proving allegations of clandestine removal, emphasizing that shortages detected on assumption basis alone were insufficient to uphold such charges. The decision provided a significant legal precedent regarding the burden of proof in cases involving duty demands and penalties based on detected shortages without corroborating evidence.