2015 (7) TMI 498 - AT - Central Excise

Clandestine removal of goods - whether the Appellant has clandestinely manufactured and removed 5,70,870 kgs of S.S. articles on the basis of a diary maintained by an employee Shri B.D. Patel, who was working as Excise Assistant of the main Appellant - Held that - Clandestine removal cannot be sustained on the basis of statements and private records maintained by an employee in the absence of any evidence of procurement of excess raw materials, use of extra power and transportation of finished goods etc. In the present proceedings, there is no indication of excess raw materials procured and extra power used. There is no seizure of clandestinely removed finished goods or seizure of any cash from clandestine transactions involved in such suspected clandestine removals. - on the basis of few confessional statements, diluted by cross-examination of those witness, cannot be made the basis of clandestine manufacture and clearances of excisable goods and accordingly duty demanded by the Revenue is not sustainable. So far as disallowing CENVAT Credit of ₹ 1,10,978.00 and imposition of equivalent penalty upon the main Appellant is concerned, it is observed from the case records that this issue has not been agitated by the Appellant before the lower authorities. Therefore, the grounds taken before this Bench, that such shortage of inputs is negligible and should be ignored, is rejected as not entertainable as the same was not agitated before the lower authorities. - Decided partly in favour of assessee.

Summary

Issues involved:
- Clandestine manufacturing and removal of Stainless Steel articles
- Disallowance of CENVAT Credit and penalty imposition

Analysis:

Issue 1: Clandestine manufacturing and removal of Stainless Steel articles
The main issue in the appeal was whether the Appellant clandestinely manufactured and removed Stainless Steel articles based on a diary maintained by an employee. The Revenue alleged that the Appellant had removed a significant quantity of articles without payment of duty. The Appellant argued that their production capacity was limited to 225 MT per month, supported by a Chartered Engineer's certificate and monthly returns. The Tribunal noted that the quantities reflected in the returns were comparable to the certified capacity. The absence of evidence regarding excess raw material procurement, power usage, or seized goods cast doubt on the clandestine removal allegations. Citing relevant case laws, the Tribunal emphasized the need for positive evidence beyond mere statements to establish clandestine removal. The Tribunal highlighted a previous case where the absence of concrete evidence led to the dismissal of duty demands. Consequently, the Tribunal found the duty demand unsustainable based on the limited evidence presented.

Issue 2: Disallowance of CENVAT Credit and penalty imposition
Regarding the disallowance of CENVAT Credit and penalty imposition, the Appellant did not raise this issue before the lower authorities. As a result, the Tribunal rejected the Appellant's argument that the shortage of inputs was negligible and should be disregarded. Since this issue was not previously addressed, the Tribunal could not entertain the Appellant's grounds at this stage. Ultimately, the appeals were allowed only concerning the clandestine manufacturing issue, with relief granted accordingly.

In conclusion, the Tribunal ruled in favor of the Appellants concerning the clandestine manufacturing allegations due to insufficient evidence and dismissed the arguments related to CENVAT Credit disallowance and penalty imposition. The judgment emphasized the importance of concrete evidence and proper verification in establishing duty demands, highlighting the need for a robust evidentiary basis in such cases.