2016 (1) TMI 267 - AT - Central Excise

Duty demand - Clandestine removal of goods - Shortage of goods found - Revenue contends that job work register and challans were not reliable as facts of removal to job work was not corroborated by the party during verification - Held that - There is no such Committee or review/authorization. In 2009 by moving miscellaneous application, the Revenue wanted to regularize the original appeal filed by the Commissioner as if authorized by the Committee of Commissioners which took decision on 12.02.2009 only. We find that the misc. application filed by the Revenue has not been categorically allowed by this Tribunal. In fact, it was disposed of with an observation that such application is infructuous and does not call for any order. The reason being that at the time of consideration of an application for condonation of delay filed by the Revenue, no objection was taken on this aspect by the respondent. - appeal has not been filed in terms of the amended provisions of Section 35 F and Section 35 E. The impugned order has not been reviewed for a decision to file an appeal by the Committee of Commissioners as per the provisions applicable during the time - no reason to interfere with the order of the ld. Commissioner (Appeals) on merits. - Decided against Revenue.

Summary

Issues:
- Maintainability of the appeal filed by the Revenue without review decision by the Committee of Commissioners
- Allegation of clandestine removal of finished goods based on shortage found during verification
- Reliability of job work register and challans in establishing material sent for job work
- Cross-examination of transporters and their statements regarding movement of goods
- Reconciliation of records and explanation for shortage of finished goods
- Summary assessments and conclusions without corroborative evidence

Analysis:

Issue 1: Maintainability of the appeal
The Tribunal examined the appeal's maintainability, emphasizing that appeals against the Commissioner (Appeals) order must be based on review directions of the Committee of Commissioners. In this case, no such review or authorization existed at the time of filing the appeal. The Tribunal noted a miscellaneous application filed by the Revenue in 2009 to regularize the appeal, but it was disposed of without explicit approval. The Tribunal highlighted that the appeal's maintainability is a legal question that can be raised at any stage. Citing a relevant High Court decision, the Tribunal found that the appeal was not filed in accordance with the applicable provisions, supporting the respondent's arguments against maintainability.

Issue 2: Allegation of clandestine removal
The Revenue alleged clandestine removal of finished goods based on a shortage found during verification. However, the Tribunal noted that statements recorded from transporters did not establish clandestine removal but rather focused on non-transport of goods for job work. The lack of cross-examination of transporters and insufficient reasons for this by the original authority raised doubts. The respondent consistently argued about incorrect reconciliation of records leading to the shortage. The Tribunal found the Revenue's conclusion of clandestine removal lacking corroborative evidence on raw material purchase, production, and transportation, supporting the Commissioner (Appeals) decision.

Issue 3: Reliability of job work register and challans
The Revenue contended that the job work register and challans were unreliable, suggesting fake entries. However, the Tribunal noted the respondent's explanations and submissions regarding the shortage, emphasizing discrepancies in record reconciliation. The Tribunal found the Revenue's reliance on assumptions and presumptions inadequate to prove clandestine removal, highlighting the lack of concrete evidence linking the shortage to such removal.

Issue 4: Cross-examination of transporters
The respondent argued that they were not allowed to cross-examine the transporters whose statements were pivotal in the case. The Tribunal observed this procedural flaw and noted the absence of reasons for denying cross-examination, indicating a lack of thorough investigation by the original authority. This raised doubts about the credibility of the evidence presented by the Revenue.

Issue 5: Reconciliation of records and shortage explanation
The respondent consistently maintained that the shortage was a result of incorrect reconciliation of records. They provided detailed explanations and reconciliation statements to support their claim. The Tribunal acknowledged these submissions and found the Revenue's assertion of clandestine removal without substantial evidence unconvincing. The lack of corroborative evidence regarding the movement and handling of finished goods weakened the Revenue's case.

Issue 6: Summary assessments and conclusions
The Tribunal criticized the Revenue's summary assessments and conclusions, noting the absence of concrete evidence to support the allegation of clandestine removal. Emphasizing the need for corroborative evidence on various aspects of production and movement of goods, the Tribunal upheld the Commissioner (Appeals) decision to allow the appeal. The Tribunal found no grounds to interfere with the detailed analysis conducted by the Commissioner (Appeals) in reaching their decision.

In conclusion, the Tribunal rejected the Revenue's appeal on both merit and maintainability, emphasizing the lack of substantial evidence to support the allegation of clandestine removal of finished goods. The detailed analysis highlighted procedural flaws, insufficient corroborative evidence, and the importance of thorough investigation in such cases.