2015 (1) TMI 168 - AT - Central Excise

Clearance of goods without payment of duty - Held that - Revenue s entire case is based on the percentage wastage itself, declared by the appellant and actually arisen and reflected in Form IV register. Whereas the declared percentage is 4 to 5% and the actual percentage wastage varies from 7 to 16%. Apart from the above difference, there is virtually no other evidence on record, indicating any clearance of the duty free procured fabrics. In fact, the declared percentage is also by the appellant and they were free to declare the same in their ARE-2 declaration, on the higher side. In fact, the one of the reasoning by the Revenue is that the appellant should have filed a fresh declaration, disclosing the higher percentage wastage. - appellate authority is only going by the differential wastage and by considering the same as sufficient evidence for clandestine removal, is rejecting the appeal. Tribunal in the case of Klene Paks Ltd. v. CCE, Bangalore-I reported in 2009 (3) TMI 837 - CESTAT, BANGALORE has held that confirmation of demand on the allegation of clandestine removal based upon the excess wastage is only an assumption and in the absence of any evidence as to the purchaser of the alleged removed goods, demand cannot be confirmed. - Decided in favour of assesse.

Summary

Issues:
1. Confirmation of demand of duty against M/s. Rhoda Textiles Pvt. Ltd.
2. Imposition of penalty against the Authorized Signatory.
3. Allegation of clandestine removal based on percentage wastage.

Confirmation of Demand of Duty:
The appeals arose from impugned orders confirming a duty demand of Rs. 18,37,145 against M/s. Rhoda Textiles Pvt. Ltd. and imposing an identical penalty. The company, engaged in exporting textile articles, procured fabric duty-free under Rule 19(2) of Central Excise Rules, 2001. Revenue alleged that the difference between declared and actual wastage indicated clearance without duty payment in the domestic market. Proceedings were initiated for the past 5 years resulting in upheld orders by the original adjudicating authority and Commissioner (Appeals).

Imposition of Penalty:
A penalty of Rs. 50,000 was imposed on Shri S.K. Jain, the Authorized Signatory of the company. The Revenue's case primarily relied on the declared percentage wastage compared to the actual wastage reflected in the statutory record. The declared wastage ranged from 4 to 5%, while the actual wastage varied from 7 to 16%. Lack of substantial evidence besides the wastage difference was noted, with the Revenue suggesting the appellant should have declared the higher percentage in their ARE-2.

Allegation of Clandestine Removal:
The Commissioner (Appeals) highlighted the difference in wastage figures between ARE-2 and Form IV register, concluding that excess wastage indicated clearance at the input stage without utilization for the intended purpose. The onus of proving clandestine removal was on the department, and the excess wastage was considered as evidence. However, the appellate authority's decision was based solely on the differential wastage, which was deemed insufficient proof for clandestine removal. A precedent case emphasized the need for evidence regarding the purchaser of allegedly removed goods for confirming demands based on excess wastage.

In conclusion, the Tribunal found no justifiable reasons to uphold the impugned orders, setting them aside and allowing both appeals with consequential relief. The judgment emphasized the importance of substantial evidence beyond wastage differentials to establish allegations of clandestine removal and confirm duty demands.