2014 (6) TMI 339 - AT - Central Excise

Duty demand - Clandestine removal of goods - Held that - It is a case where the allegation is clandestine removal of the goods on the basis of clearance register maintained by the Security Officer and the statement of Security Officer at the time of investigation. During the course of investigation, itself it has been explained to the departmental officers that there is no shortage of goods and no clandestine removal of the goods and the same were supported by various documents produced by the respondent before the investigating authority. It is also explained by the respondent that although the Security officer has maintained a register of clearance but it is a internal stock register of the goods. The goods were cleared finally from the factory gate on the basis of the gate pass and the clearance shown in gate pass are tallied with the invoices. As the respondent maintain two security checks the final security check deals with the clearance which are tallied with the actual clearance in the respondent stock register which tallies with each other and no evidence has been produced by the Revenue that these documents are not correct. Therefore, the allegation of clandestine removal is not sustainable. - Decided against Revenue.

Summary

Issues: Allegation of clandestine removal of goods, discrepancies in quantity records, replacement of rejected goods with finished goods, differences in waste and scrap records.

Allegation of Clandestine Removal of Goods:
The case involves an appeal by the Revenue against an order setting aside demands confirmed for clandestine removal of goods. The respondent, a manufacturer of enameled winding wires, was searched in 1996, leading to discrepancies in records maintained by the Security Officer regarding clearances. The Revenue alleged excess clearances and unaccounted goods, issuing a show cause notice. The adjudication order confirmed duty demands and penalties, later overturned by the Commissioner (Appeals). The Revenue contended that discrepancies in records indicated clandestine removal, while the respondent argued that explanations and documentary evidence supported the discrepancies, asserting no actual removal of goods occurred clandestinely.

Discrepancies in Quantity Records:
The Revenue argued that discrepancies between invoices and Security Officer's records indicated unaccounted goods cleared without duty payment. The respondent countered, stating the differences were explainable and supported by documentary evidence. The Commissioner (Appeals) considered the explanations, noting lack of substantial evidence supporting clandestine removal. The absence of stock shortages suggested that goods cleared matched official records, undermining the Revenue's allegations.

Replacement of Rejected Goods with Finished Goods:
The allegation of replacing rejected goods with finished goods was addressed by the respondent, citing compliance with Rule 173H of Central Excise Rules. The Revenue did not refute this compliance, leading to the dismissal of the allegation due to lack of evidence supporting the claim. The absence of queries from buyers regarding replacements further weakened the Revenue's argument.

Differences in Waste and Scrap Records:
Regarding discrepancies in waste and scrap records, the respondent clarified that variations in the number of gunny bags did not affect the actual quantity of waste and scrap cleared. The duty demand should be based on the quantity of clearance, not the packaging, rendering the allegation unsustainable. The Commissioner (Appeals) upheld these arguments, concluding that the allegations in the show cause notice were not substantiated, leading to the dismissal of the Revenue's appeal and the cross-objection.

This detailed analysis of the judgment highlights the key issues of clandestine removal allegations, discrepancies in quantity records, replacement of rejected goods, and differences in waste and scrap records, providing a comprehensive overview of the legal proceedings and arguments presented by both parties.