2012 (11) TMI 1027 - AT - Central Excise

Duty demand - Shortage of M.S. Ingots - However no discrepancy in stock - Held that - duty demand stand confirmed in respect of shortages detected at the time of visit of the officers read with the statement of Shri Vijay Kumar Agarwal. The appellants have strongly contended, the manner of weightment of the final product. It is seen that the Revenue has not produced any inventory on record to show that the weightment was actually done and the shortages were not on the basis of average weight system but real and based upon actual weightments. Similarly reliance of the Revenue on the statement of the authorized representative cannot ipso-facto lead to the inevitable conclusion of clandestine removal of final product especially when there is no variation in the stock of the raw-material. There is no other evidence on record to reflect upon the above fact - though an admission is extremely important piece of evidence, it cannot be said to be conclusive - allegations of clandestine removal are required to be established by the Revenue by production of the concrete and tangible evidence. In the present case apart from the statement of the authorized representative, there is no evidence to reflect upon the said activities - As the Revenue has failed to bring on record any evidence showing illegal manufacture and removal of their final product, I find no justification in upholding the confirmation of demand of duty or imposition of penalty on both the appellants - Following decision of Commissioner of Income Tax v. Dhingra Metal Works 2010 (10) TMI 29 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues: Duty demand on shortages detected, imposition of penalty under Section 11AC of the Central Excise Act, 1944, and Rule 26 of Central Excise Rules.

Analysis:
1. The case involved M/s. Raj Ratan Industries Ltd., a manufacturer of M.S. Ingots, where a shortage of M.S. Ingots was detected during a visit by Central Excise officers, leading to a duty demand of Rs. 1,50,265.
2. The authorized signatory admitted the shortages and agreed to pay the duty, indicating that the final product might have been disposed of without proper invoicing and duty payment.
3. Proceedings were initiated against the appellant through a show cause notice, resulting in the confirmation of duty demand, interest, and penalty under Section 11AC of the Central Excise Act, 1944, along with a separate penalty under Rule 26 of Central Excise Rules.
4. The appellant appealed the order, which was unsuccessful before the Commissioner (Appeals), leading to the current appeal before the Tribunal.
5. During the hearing, the appellant's representative and the Revenue presented their arguments before the Tribunal.
6. The Tribunal analyzed the impugned order and found that the duty demand was confirmed based on shortages detected and the statement of the authorized signatory. However, the Tribunal noted the absence of concrete evidence, such as inventory records, to prove the actual weightment of the final product and the alleged clandestine removal.
7. The Tribunal emphasized that allegations of clandestine removal must be substantiated by tangible evidence. In the absence of additional proof beyond the statement of the authorized representative, the Tribunal referred to legal precedents to highlight the importance of conclusive evidence in such cases.
8. Citing relevant case law, including a decision by the Hon'ble Delhi High Court and precedents from the Tribunal and Punjab & Haryana High Court, the Tribunal concluded that the Revenue failed to provide sufficient evidence of illegal manufacture and removal of the final product.
9. Consequently, the Tribunal set aside the impugned orders, ruling in favor of the appellant and granting consequential relief.

This detailed analysis of the judgment highlights the key issues, arguments presented, evidentiary considerations, and legal precedents that influenced the Tribunal's decision to allow the appeals and overturn the duty demand and penalties imposed on the appellants.