2015 (10) TMI 1551 - AT - Central Excise

Duty demand - Clandestine removal of goods - Imposition of equivalent penalty - Held that - The allegation in the show cause notice is that the said sponge iron has been used by the appellant for manufacturing final product. Admittedly, to manufacture final product i.e. MS Ingots the sponge iron as well as iron scrap is required. But as per the evidence on record there is no shortage of iron scrap. Therefore, the allegation of manufacturing MS Ingots of the sponge iron used for manufacturing the same is not sustainable in the absence shortage of iron scrap. In these circumstances, the allegation against the appellant is only on the basis of presumptions and assumptions. Duty cannot be demanded on allegations based on assumption and presumption - in the case of Gulabchand Silk Mills Pvt. Ltd. (2005 (3) TMI 192 - CESTAT, BANGALORE) there was excess goods found in the factory and same cannot be explained by the assessee. Therefore, it was held that the excess stock is meant for clandestine clearance but that is not the case here. Further, I find that in the case of Nissan Thermoware (P) Ltd. (2010 (12) TMI 487 - GUJARAT HIGH COURT) relied upon by the appellant the shortage of input which has been admitted by the director cannot be ground to demand duty for holding that same has been used in manufacturing of goods removed clandestinely. Therefore, I hold that the revenue failed to prove that the sponge iron found short was used in manufacturing of final product. Therefore, demand is not sustainable. - Decided in favour of assessee.

Summary

Issues:
- Appeal against demand on duty, interest, and penalty for alleged clandestine clearance of goods.
- Discrepancies in stock of finished goods, sponge iron, and iron scrap.
- Lack of panchnama for weighment of finished goods and iron scrap.
- Allegation of using short inputs for manufacturing MS Ingots without evidence.
- Comparison with relevant case laws for duty demand justification.

Analysis:
1. The appellant appealed against a demand on duty, interest, and penalty due to alleged clandestine clearance of goods. Discrepancies were found in the stock of finished goods, sponge iron, and iron scrap during investigations conducted on different dates.

2. The appellant argued that no panchnama was drawn for the weighment of finished goods and iron scrap, challenging the justification for shortages. They contended that without evidence of iron scrap shortage, the allegation of using short inputs for manufacturing MS Ingots was baseless.

3. The Revenue supported the demand, citing weighment shortages as evidence of clandestine clearance. They referenced previous cases to justify the duty demand, emphasizing the importance of shortages in determining duty liability.

4. The Tribunal noted discrepancies in the investigation, highlighting the absence of panchnama for certain weighments. Without reliable evidence of shortages, the allegations against the appellant were deemed unsustainable. The lack of shortage in iron scrap further weakened the Revenue's case.

5. The Tribunal concluded that the investigation was weak, relying on presumptions and assumptions rather than concrete evidence. Case laws cited were deemed irrelevant as they did not align with the circumstances of the current case. The Revenue failed to prove the alleged use of short inputs in manufacturing final products.

6. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief. The decision was made based on the lack of substantial evidence supporting the duty demand for alleged clandestine clearance.