2013 (7) TMI 595 - AT - Central Excise

Clandestine Removal of goods - Case based upon an assumption that wastage arisen during the course of manufacture of POY should not be more than specified percentage - Wastage arisen during the course of manufacture of POY should not be more than 7% and Appellants recorded the wastage of around 16% - Cleared POY in the garb of extra wastage shown by them Held that - Not even any iota of evidence produced by the Revenue to confirm the allegation. Entire case is based upon assumption and presumption and neither any documentary evidence has been seized by the Revenue nor any customer has agreed to have received POY under the garb of waste - The process adopted by one manufacturer for manufacture of POY as also the technology, the kind of machines used and the age of machine used would be relevant factors to decide the quantum of generation of waste. Excess waste may arise out of number of facts as detailed by the expert which stand un-rebutted by the Revenue. Such higher production can be on account of deviation in production parameters, fault of operators of machines, due to use of sub-standard raw materials, technology inefficiency or the power supply cut therein or may be attributed to inferior quality of fiber etc - Revenue cannot build its case based upon the theoretical percentage calculation of waste generated, without production of any evidence to reflect upon the above allegation- Decided in favor of Assessee. Adjudicating authority confirmed the demand of duty of Rs.6,27,997/against the manufacturing unit in respect of 5 invoices which stand procured by the Revenue along with intelligence report Held that - Invoices not recovered from the appellant s factory. As such, the onus to show that appellant cleared the goods under the cover of said invoices lies very heavily on the Revenue. The Commissioner while confirming the demand has taken into account the statement of Shri R C Saxena. However, it is the appellant s case that as Shri Saxena was relieved from his service on account of financial mishandling and he fabricated these documents and produced the same to the Revenue so as to take revenge from the appellant. However, subsequently he filed an affidavit specifically stating that these invoices were fabricated by him - Apart from these invoices, there is virtually no evidence on record to show that the appellant has cleared the goods under the cover of such invoices - Accordingly the confirmation of demand to the extent of Rs.6,27,997/and penalty imposed on unit and imposition of penalty is set aside Decided in favor of Assessee.

Issues Involved:
1. Confirmation of duty demand and imposition of penalty on M/s. Rajratan Synthetics Ltd and its Managing Director.
2. Dropping of duty demand and non-imposition of penalties on M/s. Rajratan Synthetics Ltd, its Chairman, and its authorized signatory.
3. Allegations of clandestine removal of goods based on seized documents and statements.
4. Allegations of under-valuation of final products by recovering extra amounts under different headings.
5. Allegations of excess production of waste to cover up unauthorized removal of goods.

Detailed Analysis:

1. Confirmation of Duty Demand and Imposition of Penalty:

The Commissioner confirmed a demand of Rs. 6,27,997/- against M/s. Rajratan Synthetics Ltd and imposed a penalty of Rs. 25,000/- on its Managing Director. This was based on five parallel invoices allegedly used for unauthorized removal of Polyester Partially Oriented Yarn (POY). The Tribunal found that the evidence provided, mainly the statement of Shri R.C. Saxena, was insufficient and lacked corroboration. The invoices were not recovered from the appellant's factory, and there was no substantial evidence to prove the clandestine removal of goods. Hence, the confirmation of the demand and penalties was set aside.

2. Dropping of Duty Demand and Non-Imposition of Penalties:

The Commissioner dropped a significant portion of the demand (Rs. 1,40,01,383/-) against M/s. Rajratan Synthetics Ltd, citing that documents seized from third-party premises do not meet the requirements of Section 36A of the Central Excise Act, 1944. The Tribunal upheld this decision, noting that the evidence from transporters' records and statements lacked corroboration. The Tribunal emphasized that charges of clandestine removal require positive and tangible evidence, which was not provided by the Revenue. Thus, the dropping of the demand and non-imposition of penalties on the Chairman and the authorized signatory were upheld.

3. Allegations of Clandestine Removal:

The Revenue's case was based on intelligence reports, seized documents, and statements from transporters and company representatives. However, the Tribunal found that the evidence was not sufficient to prove clandestine removal. Statements from transporters and other third parties were either retracted or clarified during cross-examination, weakening the Revenue's case. The Tribunal reiterated that serious charges like clandestine removal must be backed by strong evidence, which was lacking in this case.

4. Allegations of Under-Valuation:

The Revenue alleged that M/s. Rajratan Synthetics Ltd under-valued their final products by recovering extra amounts under headings like freight insurance and loading. The Commissioner, however, found that the assessable value adopted by the assessee was correct, supported by credit notes, ledger accounts, and other documents. The Tribunal agreed with this finding, stating that the extra amounts were attributable to legitimate expenses and not to the value of the goods.

5. Allegations of Excess Production of Waste:

The Revenue contended that the appellant showed excess production of waste to cover up unauthorized removal of POY. However, the Commissioner found that the excess wastage was due to several legitimate reasons, including old machinery, power cuts, and inexperienced workers. The Tribunal upheld this view, noting that the Revenue did not provide any evidence to show that the excess wastage was intentionally shown. The Tribunal emphasized that assumptions and theoretical calculations cannot substitute for concrete evidence.

Conclusion:

The Tribunal rejected all the appeals filed by the Revenue and allowed the appeals filed by M/s. Rajratan Synthetics Ltd and its Managing Director. The decisions were based on the lack of substantial evidence to support the Revenue's claims of clandestine removal, under-valuation, and intentional excess production of waste. The Tribunal highlighted the necessity of positive and tangible evidence in cases involving serious charges like clandestine removal.

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