2014 (2) TMI 1012 - AT - Central Excise

Denial of CENVAT Credit - Clandestine removal of goods - After detailed investigation, the Revenue Officers on scrutiny of the records carne to a conclusion that the respondent had removed their finished goods clandestinely without payment of duty and they have availed ineligible Cenvat credit of the petrochemical products the quantity of which was short received in their factory premises - Imposition of equivalent penalty - Held that - As regards the denial of the Cenvat credit to the respondent on the inputs which were received short, I find that the assessee in their appeal against the very same impugned order had contended that the confirmation of demand on this ground of even Rs. 38,250/- is incorrect. The said appeal was allowed by this Bench vide final order dated 4-5-2012 wherein the Bench has held that there is no case for upholding the order passed by the Commissioner (Appeals) for denial of Cenvat credit on the quantity of inputs which were received short. Conversely it would mean that the Bench has accepted the findings of the first appellate authority that the loss of the inputs being marginal, the Cenvat credit should not be denied to an assessee. Respectfully following the same; I hold that the Revenue s appeal to the extent it challenges the appeal of the first appellate authority on this point of denial of Cenvat credit for short receipt of the inputs is liable to be rejected. In the Order-in-Original, the adjudicating authority has admitted that as far as the role of buyers is concerned, there is little evidence from the buyers end to corroborate that the goods despatched were not under the proper duty paying documents and also noted that Revenue would not bring corroborative evidences to substantiate their case. If these are the findings of the adjudicating authority as to there being no corroborative evidences, then, the Revenue has failed to bring home charges against the respondent, as has been correctly held by the first appellate authority as per the findings reproduced hereinabove. I find that the first appellate authority has correctly come to the conclusion that there is no evidence of clandestine removal of the goods by the respondent herein. In view of this, the Revenue s appeal against the main assessee fails. Since the Revenue s appeal against the main assessee fails, the consequent appeals of setting aside of the penalties on other two individuals also fail - Decided against Revenue.

Summary

Issues Involved:
1. Denial of Cenvat credit on inputs received short.
2. Confirmation of demand of duty on charges of clandestine removal.
3. Imposition of penalties on the main assessee and individuals.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit on Inputs Received Short:
The Revenue appealed against the first appellate authority's decision, which had set aside the demand for Cenvat credit on inputs received short, except for Rs. 38,250/-. The appellate tribunal noted that the assessee had also appealed against the confirmation of this demand, and the tribunal had previously ruled in favor of the assessee, stating that "the loss of the inputs being marginal, the Cenvat credit should not be denied to an assessee." Therefore, the tribunal upheld the first appellate authority's decision and rejected the Revenue's appeal on this point.

2. Confirmation of Demand of Duty on Charges of Clandestine Removal:
The Revenue argued that the first appellate authority erred in not considering the confessional statements of senior personnel of the respondent-assessee and in setting aside the demands raised due to short receipt of inputs. The tribunal reviewed the records and found that the first appellate authority had determined that the finished goods analysis register, maintained for ISO standards, was not a dependable record to establish clandestine removal without corroborative evidence. The tribunal noted that "there is no co-relation between the consumption of raw materials, actual finished goods manufactured, and cleared." Additionally, statements from the respondent's customers confirmed that they had not received any goods without payment of duty. The tribunal emphasized that the Revenue failed to provide corroborative evidence to support the allegations of clandestine removal. Consequently, the tribunal upheld the first appellate authority's findings that there was no evidence of clandestine removal and rejected the Revenue's appeal on this issue.

3. Imposition of Penalties on the Main Assessee and Individuals:
The Revenue contended that the penalties imposed on the main assessee and individuals should not have been set aside by the first appellate authority. However, the tribunal found that the statements of the respondent's customers and the cross-examination of Shri Subhash Solanki, who retracted his original statement, indicated that there was no clandestine removal of goods. The adjudicating authority had also noted the lack of corroborative evidence from the buyers' end. As the Revenue's appeal against the main assessee failed, the tribunal concluded that the appeals regarding the penalties on the individuals also failed. Therefore, the tribunal upheld the first appellate authority's decision to set aside the penalties.

Conclusion:
The tribunal rejected the Revenue's appeals on all issues, affirming the first appellate authority's decision to set aside the demands and penalties, except for the marginal amount of Rs. 38,250/-. The tribunal concluded that the Revenue failed to provide sufficient evidence to support the charges of clandestine removal and the denial of Cenvat credit.