2013 (11) TMI 1224 - AT - Central Excise

Clandestine removal of sugar or not - Empty bags dated last year cleared in the present year without changing of the year on the bag Held that - The appellant explained that very often empty bags of the previous sugar season are also used and while using the empty bags of the previous sugar season, the labourers have not changed the year - the explanation given by the appellant is plausible - Just because 5577 bags were bearing the markings of the previous sugar season, the same cannot be assumed to be the unaccounted production of those years and on this basis, the shortage of equal number of sugar bags of the sugar season 2000-2001 cannot be presumed and duty cannot be demanded on this basis when there is no other evidence regarding unaccounted manufacture or clandestine clearance order set aside Decided in favour of Assessee.

Issues:
1. Allegation of unaccounted production and clandestine removal of sugar bags.
2. Duty demand, confiscation, and penalty imposed by the authorities.
3. Appeal against the order-in-original and order-in-appeal.

Issue 1: Allegation of unaccounted production and clandestine removal of sugar bags:
The case involved the appellant, a sugar manufacturer, who was accused of unaccounted production and clandestine removal of sugar bags. The central excise officers found discrepancies in the markings on the bags stored in the factory, with some bags bearing the markings of previous sugar seasons. The department alleged that these bags were unaccounted production intended for clandestine removal, leading to duty demand and confiscation of the bags. The appellant argued that the markings on the bags did not necessarily indicate unaccounted production and clandestine clearance, as empty bags from previous seasons were often reused without changing the year. The appellate tribunal agreed with the appellant, stating that the explanation provided was plausible. The tribunal ruled that the mere presence of bags with markings from previous seasons did not prove unaccounted production, and without further evidence, duty demand could not be justified. Consequently, the tribunal set aside the impugned order, allowing the appeal.

Issue 2: Duty demand, confiscation, and penalty imposed by the authorities:
The Assistant Commissioner, in the order-in-original, confirmed the duty demand against the appellant, along with interest, and ordered the confiscation of the sugar bags allegedly unaccounted for, with an option for redemption on payment of a fine. Additionally, a penalty was imposed on the appellant under the Central Excise Rules. The Commissioner (Appeals) upheld the Assistant Commissioner's order, leading to the filing of the appeal before the tribunal. The appellant contested the duty demand, confiscation, and penalty on the grounds that there was no actual shortage of stock and that the markings on the bags did not prove clandestine activities. The Departmental Representative defended the impugned order, emphasizing the findings of the Commissioner (Appeals) and the details in the RG-1 register. However, the tribunal, after considering both sides' submissions and reviewing the records, found in favor of the appellant. The tribunal held that the duty demand and confiscation based solely on the markings on the bags were not sustainable, ultimately allowing the appeal and setting aside the impugned order.

Issue 3: Appeal against the order-in-original and order-in-appeal:
The appeal before the tribunal challenged the order-in-original issued by the Assistant Commissioner, which confirmed the duty demand, confiscation, and penalty, as well as the order-in-appeal by the Commissioner (Appeals) upholding the Assistant Commissioner's decision. The appellant argued that there was no actual shortage of stock and that the markings on the bags did not conclusively prove clandestine activities. The tribunal, after thorough consideration of the submissions from both sides and a review of the records, found merit in the appellant's arguments and set aside the impugned order. Consequently, the appeal was allowed, providing relief to the appellant against the duty demand, confiscation, and penalty imposed by the authorities.

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