2014 (3) TMI 50 - AT - Central Excise

Clandestine clearance of the scrap generated in their factory - generation of scrap to the tune of 58% to 82% - Held that - as per the allegation made by the Revenue, the scrap generated by the appellant would be to the tune of 57% to 88%. In a unit manufacturing electrical goods, generation of scrap to the extent of 86% is not only difficult but is an impracticable approach of business. If the said allegation is accepted, the same would lead to the emergence of finished goods to the tune of 14% only, which no businessmen can afford to do. Entire case of the revenue is based upon the loose slips recovered during the searched. Admittedly the clandestine removal charge is a serious allegation and has to be established by adducing some positive and cogent evidence, corroborating the same. In the absence of any other evidence, allegation of clandestine removal can not be upheld. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
Alleged clandestine clearance of scrap and finished goods, confirmation of demand, imposition of penalties, examination of scrap generation percentage, consideration of verification report.

Analysis:
The case involved the appellant, a manufacturer of Switchgear, facing allegations of clandestine clearance of scrap and finished goods based on loose papers recovered during a search at their factory. Statements of key personnel were recorded, but no confession regarding the clandestine activities was obtained. The original adjudicating authority upheld the demand of duty and penalties. However, the Commissioner (Appeals) set aside the order, emphasizing that loose papers were insufficient evidence for clandestine removals.

Upon appeal by the revenue, the Tribunal remanded the matter to re-examine the scrap generation percentage claimed by the revenue. The Tribunal noted discrepancies in the assessment of scrap generation, highlighting the impracticality of a high percentage of scrap in a manufacturing unit. The Tribunal emphasized the need for proper evidence to establish clandestine activities and set aside the previous order, allowing the appeal with consequential relief to the appellant.

The revenue submitted a verification report alleging a high percentage of scrap generation, which was deemed impractical for a manufacturing business. The report raised doubts about the accuracy of adding kachha slip figures to the RG-1 register. The Tribunal emphasized the seriousness of clandestine removal charges, requiring positive and cogent evidence for substantiation. Without additional evidence, the allegation of clandestine removal could not be upheld, leading to the appeal's allowance and relief to the appellant.

In conclusion, the Tribunal's decision focused on the lack of concrete evidence supporting the allegations of clandestine activities. The scrutiny of the scrap generation percentage and the verification report highlighted inconsistencies and impracticalities in the revenue's claims. The importance of substantial evidence in establishing serious charges like clandestine removal was emphasized, leading to the setting aside of the previous order and the appellant's favorable outcome.