2014 (4) TMI 96 - AT - Central Excise

Clandestine removal of goods - Manufacture of paan masala and gutka - Cash found in office premises - Unaccounted sale of gutka and paan masala - Shortage of raw-materials - Held that - Revenue, apart from referring to the shortages noticed by the visiting officers, has not referred to any other evidence to substantiate the allegation of clandestine removal. It is well settled law that the shortages by itself cannot be held to be sufficient evidences so as to lead to the inevitable conclusion of the clandestine removal - shortages in one of the raw-materials cannot be adopted as the basis for alleging clandestine manufacture and removal in the absence of any independent evidence available on record - shortage of one of the raw-materials and even the admission by the director cannot be held to be sufficient evidence so as to indicate clandestine removal. - Decided in favor of assessee. Demand in respect of sada paan masala and Gutka - Held that - The Revenue has failed to advance any evidence to show as to how such huge quantum of final product allegedly manufactured and cleared by the appellants, without payment of duty was transported, sold to whom and how the consideration for the same was received. There is also no evidence for purchase of the unaccounted raw-materials. - Decided in favor of assessee. Confiscation of cash found at factory premises - Held that - It is well established that the onus to show that the Indian currency was the sale proceeds of the clandestinely removed goods is upon the Revenue, which is required to be discharged by production of affirmative evidences. - Decided in favor of assessee. Confiscation of cash found at residence - Held that - Admittedly, the residential premises were common residential premises of appellants as also all the brothers and their wives, it is not coming up on record as to at whose instance and as to from which room the said cash was recovered. - Decided in favor of assessee.

Issues Involved
1. Duty demand of Rs.1,81,000/-.
2. Demand of duty of Rs.1,71,149/- for sada paan masala and Rs.32,88,080/- for Gutka.
3. Duty confirmation and confiscation of final product recovered from dealer's premises.
4. Confiscation of currency of Rs.19,43,000/-.

Issue-wise Detailed Analysis

(A) Duty Demand of Rs.1,81,000/-
(i) The duty demand of Rs.1,81,000/- was confirmed against M/s. Sarin & Sarin based on shortages of raw materials detected during a visit by officers. The appellants argued that the shortages were due to semi-literate persons maintaining the accounts and issuing raw materials on an average basis. They contended that mere shortages cannot be considered evidence of clandestine removal without corroborative evidence. The Tribunal referenced several decisions supporting this view, including the case of Nissan Thermoware Pvt. Ltd. vs. CCE, Daman, which was upheld by the Hon'ble High Court of Gujarat.

(ii) The Revenue's contention was that the shortages indicated the raw materials were used for manufacturing final products cleared clandestinely.

(iii) The Tribunal found that mere shortages without corroborative evidence cannot substantiate allegations of clandestine removal. It referenced multiple judgments, including CIT vs. Dhingra Metal Works, to support this position.

(iv) Consequently, the demand of Rs.1,81,006/- and the associated penalty were set aside.

(B) Demand of Duty of Rs.1,71,149/- for Sada Paan Masala and Rs.32,88,080/- for Gutka
(i) The demand was based on alleged clandestine removal of products from April 2000 to March 2004. The calculation was based on theoretical consumption of raw materials and the efficiency of packing machines. The appellants argued that the accounts only reflected first-stage wastages and did not account for second-stage wastages during mixing and packing. They referred to a 'quantitative tally register' to support their claim.

(ii) The Tribunal noted that the Revenue's case was based on theoretical calculations without corroborative evidence. There was no evidence of transportation, buyers, or unaccounted raw material purchases.

(iii) The Tribunal referenced decisions like Hilton Tobaccos Ltd. vs. CCE, Hyderabad, which held that theoretical calculations without corroborative evidence are not sustainable. It emphasized that serious charges of clandestine removal require substantial evidence.

(iv) The demands of Rs.1,71,149/- and Rs.32,88,080/- along with penalties were set aside.

(C) Duty Confirmation and Confiscation of Final Product Recovered from Dealer's Premises
(i) The Tribunal found no justification for the demand of Rs.4,92,525/- for goods seized from M/s. Basudeo Prasad & Sons. The Revenue failed to provide evidence that the goods were cleared without payment of duty. It emphasized that goods in the market are deemed duty-paid unless proven otherwise.

(ii) Consequently, the confirmation of demand and confiscation of goods from the dealers' premises were set aside.

(D) Confiscation of Currency of Rs.19,43,000/-
(i) Rs.3,46,000/- was seized from the factory premises, suspected to be sale proceeds of clandestinely removed goods. The Tribunal noted that the Revenue did not provide affirmative evidence to support this claim. The appellants produced affidavits and documents showing the cash was from the sale of an old car.

(ii) The Tribunal found no merit in the lower authorities' reasoning for rejecting the affidavits and set aside the confiscation of Rs.3,46,000/-.

(iii) For the remaining Rs.15.97 lakhs, the Tribunal noted that the cash was recovered from a common residential premises without specifying the room or person. The appellants provided documentary evidence, including certificates from the Income Tax Department, showing the cash belonged to various family members.

(iv) The Tribunal referenced several decisions, including Pandit DP Sharma vs. CCE, Calcutta-II, emphasizing that the onus to prove the cash was from clandestine sales lies with the Revenue. It set aside the confiscation of Rs.15.97 lakhs.

Conclusion
The Tribunal set aside all duty demands, confiscations, and penalties, allowing the appeals with consequential relief to the appellants. The judgment emphasized the need for corroborative evidence to substantiate allegations of clandestine removal and the requirement for the Revenue to discharge the burden of proof.

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