2014 (6) TMI 127 - AT - Central Excise

Duty demand - Shortage in stock - Lack of evidence - Held that - The Director on the spot statement accepted such shortages but did not accept that the same were on account of clandestine removal. In fact immediately on the next day, he explained that the raw material in the furnace was taken as 35 MT whereas the same was to the tune of 80 MT - there is virtually no evidence on record indicating that such short found raw material has been either cleared by the appellant in a clandestine manner or has been used in the manufacture of final product cleared without payment of duty. There are no investigations done by the department and no further evidence stands produced on record. there is no evidence on record that such alleged excess found goods were for clandestine removal, in the absence of which the confiscation of the same cannot be upheld. The same is accordingly set aside. - Decided in favour of assessee.

Summary

Issues:
Clandestine removal of goods, shortage of raw material, excess found finished goods, confirmation of demand, imposition of penalty, confiscation of goods.

Analysis:

1. Shortage of Raw Material:
The appellant, engaged in manufacturing MS rods, channels, and angles, faced allegations of shortages and excesses during a Central Excise officers' visit. Despite the Director initially accepting the shortages, subsequent explanations regarding the stock of raw material in the furnace raised discrepancies. The appellant disputed the difference in raw material stock, emphasizing the capacity of the furnace based on the arrangement of MS ingots. Statements from the Director and another individual were recorded, highlighting discrepancies in the stock of raw material.

2. Clandestine Removal Allegations:
Following the investigation, proceedings were initiated against the appellant alleging clandestine removal based on the shortages detected. The original adjudicating authority confirmed the duty demand and imposed penalties, with the confiscation of excess finished goods. However, the Director's explanations and lack of concrete evidence linking the shortages to clandestine activities raised doubts. The Tribunal emphasized the need for sufficient evidence to prove clandestine activities, citing a relevant case law.

3. Judicial Precedent and Decision:
Referring to the case of Swaroop Casting P. Ltd. Vs. CCE, Meerut-I, the Tribunal highlighted that shortages alone do not conclusively indicate clandestine activities without substantial evidence. Relying on this precedent, the Tribunal found no merit in confirming the demand or imposing penalties. The lack of departmental investigations and additional evidence further weakened the case against the appellant.

4. Excess Found Finished Goods:
Regarding the excess finished goods, the Tribunal noted the absence of evidence supporting allegations of clandestine removal. Without concrete proof linking the excess goods to any illicit activities, the confiscation of the finished products was deemed unjustified. Consequently, the Tribunal set aside the impugned orders, allowing the appeal and granting consequential relief to the appellant.

In conclusion, the judgment focused on the lack of substantial evidence linking the shortages and excesses found during the Central Excise officers' visit to clandestine activities. The Tribunal emphasized the importance of concrete proof in establishing allegations of clandestine removal, ultimately ruling in favor of the appellant due to the absence of compelling evidence supporting the charges.