2008 (4) TMI 261 - AT - Central Excise

Clandestine removal - Officers on visit to factory found one Gate Register which contained the details of receipt and removal of goods/stores etc. - Respondents had given detailed explanation in respect of each item for repairing job which was recorded in the Adjudication Order - no evidence was found to establish the charge of clandestine removal of goods - in any event, the failure to observe the procedure of removal of repairing goods cannot be treated as charge of clandestine removal

Summary

Issues:
1. Authenticity of Gate Register
2. Shortage of inputs and duty demand
3. Adjudication and penalty imposition
4. Appeal by Revenue

Issue 1: Authenticity of Gate Register
The case involved a dispute regarding the authenticity of the Gate Register maintained by the Respondent's factory, which recorded the receipt and removal of goods. Central Excise officers detected a shortage of inputs during stock verification based on the Gate Register, leading to a demand for duty. The Adjudicating Authority dropped the duty demand based on the Gate Register but confirmed a demand related to the shortage of inputs and imposed a penalty under Rule 173Q of the Central Excise Rules, 1944. The Revenue appealed the decision.

Issue 2: Shortage of inputs and duty demand
The Revenue contended that the authenticity of the Gate Register was established through statements of various persons, and the Respondent's explanation related to repairing work was an afterthought. The Manager of the Respondent stated that the goods were received for repairing purposes, but failed to produce documentary evidence supporting this claim. However, detailed explanations provided by the Respondents regarding each item for repairing job were considered during adjudication, and no evidence was found to support the charge of clandestine removal of goods.

Issue 3: Adjudication and penalty imposition
The Adjudication Order highlighted the detailed explanations given by the Respondents regarding the repairing works, which were further supported in the Commissioner (Appeals) decision. The Commissioner rejected the appeal filed by the Revenue, emphasizing that the Respondents provided details of the removal of goods under the Gate Register, which were not contradicted by any positive evidence. Therefore, the charge of clandestine removal was not established.

Issue 4: Appeal by Revenue
The Revenue's appeal strongly relied on the Manager's statement regarding the repairing job and the alleged failure to observe the procedure for the movement of excisable goods for repair purposes under the Central Excise Rules. However, both lower authorities verified the statement of repairing job and found no material supporting the charge of clandestine removal. The Tribunal concluded that the failure to observe the procedure for the movement of repairing goods does not amount to clandestine removal. Consequently, the Tribunal rejected the Revenue's appeal, upholding the order of the Commissioner (Appeals).