2013 (12) TMI 391 - AT - Central Excise

Clandestine removal of goods - Unexplained shortage of Cenvat credit Absence of Evidences Held that - The fact that the department is comparing the stock of raw material as mentioned in the RG 23A register as on 3rd August 2004 with the stock of raw material actually found in that day and the entries regarding the issue of raw material had been made only upto 30th June 2004, for determining the shortage of inputs, if any, the figure regarding the quantity of raw material consumed should have been updated after taking into account the quantity of raw material consumed during the month of July 2004 and without doing this, the question of shortage or excess cannot be determined. Though an opportunity was given to the department to rectify this mistake, this has not been done - The department has neither accepted the figures of consumption of raw material during July 2004 as given by the respondent nor has made any effort to ascertain the quantity of inputs consumed on the basis of production of finished products - The approach of the department is absurd - in absence of any evidence showing clandestine removal it cannot be alleged that there was unexplained shortage of Cenvat credit availed input and the same had been illicitly removed without reversal of credit Decided against Revenue.

Issues:
1. Shortage of raw material in Central Excise duty availed inputs.
2. Dispute over the issue of raw material for manufacture during a specific period.
3. Manipulated documents and over-writings in the RG-23A register.
4. Allegations of clandestine removal of Cenvat credit availed raw material.
5. Failure to update records and determine the actual shortage or excess of inputs.
6. Inconsistencies in the department's approach and lack of evidence for clandestine removal.

Issue 1: Shortage of raw material in Central Excise duty availed inputs

The case involved a dispute regarding the shortage of raw material in Central Excise duty availed inputs at the respondent's factory. The jurisdictional Central Excise officers found a significant discrepancy between the recorded balance of input in the RG-23A register and the actual physical stock during their visit. The department alleged a shortage of 85924 kg, leading to a demand for recovery of Cenvat credit. However, the Commissioner (Appeals) dismissed the Revenue's appeal, emphasizing that the entries regarding the issue of raw material were incomplete, and continuous production during the period in question supported the respondent's explanation.

Issue 2: Dispute over the issue of raw material for manufacture during a specific period

The Tribunal remanded the matter for a denovo decision to determine whether there was a shortage of cenvated raw material. The Additional Commissioner confirmed the demand, citing manipulated documents regarding the consumption of raw material. However, the Commissioner (Appeals) set aside this decision, highlighting the lack of corroborative evidence for clandestine removal of inputs. The respondent argued that the production of finished products during the period implied the use of raw material, challenging the department's allegations.

Issue 3: Manipulated documents and over-writings in the RG-23A register

The department raised concerns about manipulated documents and over-writings in the RG-23A register, casting doubt on the validity of the records presented by the respondent. This issue contributed to the dispute over the accuracy of the information regarding the receipt and issue of raw material during the relevant period, leading to conflicting interpretations by the adjudicating authorities.

Issue 4: Allegations of clandestine removal of Cenvat credit availed raw material

The department alleged clandestine removal of Cenvat credit availed raw material without payment of duty based on the discrepancy in the recorded and physical stock of inputs. However, the Commissioner (Appeals) and the Tribunal found no substantiated evidence to support these allegations, emphasizing the need for a comprehensive assessment of the raw material consumption and production data to establish any wrongdoing conclusively.

Issue 5: Failure to update records and determine the actual shortage or excess of inputs

The failure to update records and accurately determine the quantity of raw material consumed during the period in question emerged as a critical flaw in the department's approach. Despite opportunities to rectify this oversight, the department did not undertake the necessary steps to calculate the actual shortage or excess of inputs, leading to a flawed assessment of the situation.

Issue 6: Inconsistencies in the department's approach and lack of evidence for clandestine removal

The judgment highlighted inconsistencies in the department's approach, particularly regarding the assessment of raw material consumption and the determination of shortages. The lack of concrete evidence supporting the allegations of clandestine removal of inputs undermined the department's case, ultimately leading to the dismissal of the Revenue's appeal and the acceptance of the Commissioner (Appeals)'s decision.

The judgment thoroughly analyzed the issues related to the shortage of raw material, disputed records, allegations of clandestine removal, and the failure to update and assess the actual consumption of inputs. The decision emphasized the importance of substantiated evidence and a comprehensive evaluation of production data to establish any wrongdoing conclusively.

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