2007 (5) TMI 154 - AT - Central Excise

Clandestine removal Appellant contended that the allegation of clandestine removal not sustained on the ground of the finished goods found in the investigation is under work-in-progress Clandestine removal not prove and penalty set aside

Summary

Issues:
1. Allegation of clandestine removal of finished goods and shortage of raw materials.
2. Confiscation order with redemption fine, duty-demand, levy of interest, and penalty.
3. Lack of proper accounting leading to allegations by the Revenue.

Analysis:
1. The Appellant contended that the finished goods discovered during the investigation were actually under work-in-progress and not meant for clandestine removal. They argued that the goods were not in a marketable condition and the shortage of raw materials was due to mishandling by workers. The Appellant challenged the order of confiscation, redemption fine, duty-demand, interest, and penalty as unjustified.

2. The Appellant's Counsel emphasized that the goods were not sold and the allegation of finished goods was an attempt to implicate the Appellant falsely. They argued that the shortage of inputs was due to the negligence of illiterate workers. On the other hand, the Revenue argued that the Appellant's behavior was reckless, and the lack of proper documentation indicated unaccounted goods. The Revenue contended that the Appellant failed to prove the deficiency of inputs was not related to manufacturing unaccounted goods.

3. After hearing both sides and reviewing the records, it was found that there was excess and deficiency in finished goods and inputs during the inventory. However, the Appellant had already paid duty on the finished goods and raw materials before the show cause notice was issued. The lack of proper accounting was a significant issue, but there was no evidence of goods being removed clandestinely. The Tribunal concluded that the lack of proper accounting alone cannot prove clandestine removal without sufficient circumstantial evidence. The Tribunal set aside the impugned order of confiscation and redemption fine, imposing a penalty for irregularities.

4. The Tribunal ruled that the duty liability had been discharged for the accounted goods before the show cause notice, making further duty payment unnecessary. The impugned order was set aside, and the appeal was partly allowed based on the directions provided in the judgment.