2012 (11) TMI 1009 - AT - Central Excise

Duty demand - Clandestine removal of goods - Shortage in stock - Held that - there is no acceptance of clandestine removal of goods by Shri Dipan Kumar. In fact, he has repeatedly said that they enter all the stock in their daily production register. The evidentiary value attached to the said statement as has been done by the lower authorities has to be assessed in the light of the other corroborative evidences. Apart from shortages and the said statement accepting shortages, there is no other evidence to reflect upon the clandestine removal of the final product. Tribunal in a number of cases has held that mere shortages detected at the time of stock verification, by itself, cannot lead ipso facto to the inevitable conclusion of clandestine removal. I also note that the Hon ble Delhi High Court in the case of M/s. Dhingra Metal Works 2010 (10) TMI 29 - DELHI HIGH COURT has observed that the statement recorded during the survey is not a conclusive piece of evidence by itself and the same cannot be made the sole basis to decide against the assessee - Decided in favour of assessee.

Summary

Issues: Alleged clandestine removal of goods, shortage of stock, imposition of penalty

Analysis:
1. The case involved the appellants, engaged in the manufacture of bars and rods, who were visited by Central Excise Officers in 2009. The officers found a shortage of 41258 kg of bars and rods compared to the recorded balance, leading to the allegation of clandestine removal.

2. A show cause notice was issued to the appellant, accusing them of clandestine removal and proposing demand confirmation and penalty imposition. The Deputy Commissioner confirmed the demand and imposed a penalty under section 11AC of the Act, which was upheld by the Commissioner (Appeals), leading to the present appeal.

3. The Tribunal noted that the Revenue's case was primarily based on the shortages detected during the officers' visit. However, it was highlighted that there was a lack of proper weighment and preparation of weighment slips to accurately determine the shortages in the stock of bars and rods, casting doubt on the evidence presented.

4. Additionally, the statement of the Managing Director, recorded on the spot, did not explicitly admit to clandestine removal. The Director attributed the shortage to errors in reporting by unskilled labor and inter-mixing of semi-finished and finished goods, emphasizing that all stock was entered in the daily production register.

5. The Tribunal emphasized that the mere detection of shortages during stock verification does not automatically prove clandestine removal. Referring to previous cases and a High Court judgment, it was highlighted that statements recorded during surveys are not conclusive evidence on their own and must be considered alongside other corroborative evidence.

6. Ultimately, the Tribunal found insufficient evidence to support the allegations of clandestine removal and shortages, leading to the decision to set aside the orders of the lower authorities and allow the appeal in favor of the appellants. The judgment was pronounced on 8th November 2012.