2016 (9) TMI 730 - AT - Central Excise

Generation of waste during manufacturing process - allegation of clandestine removal of goods - It was submitted by the respondent that there was nominal burning loss of 1.15% and 1.19% during the said period. - Held that - The whole investigation/ audit remained faulty and the show cause notices were issued to both the respondents in the wake to allege the respondent no.1 has cleared the goods clandestinely. In the show cause notice it was not considered that when the respondent no.1 has cleared waste and scrap on payment of duty therefore, on such quantity of waste and Scrap, further, duty was not required to be demanded. Accordingly, on the basis of assumption and presumption it was alleged that respondent no.2 has not received the goods. Accordingly, I find that whole investigation is faulty and the show cause notices were issued to the respondent without producing any evidence on records. - Demand set aside - Decided in favor of asssessee.

Summary

Issues:
Proceedings quashed against the respondent based on audit findings alleging clandestine removal of goods and denial of cenvat credit.

Analysis:
The Revenue filed appeals against the order quashing proceedings initiated against the respondent, engaged in manufacturing ERW Pipes/Galvanized Pipes. An audit revealed a balance quantity of inputs not with the respondent, presumed as processing loss. Show cause notices were issued alleging clandestine clearance without duty payment. The Ld. Commissioner (A) set aside the adjudication order. The Revenue contended that waste & scrap not found during audit indicated clandestine removal, seeking duty payment, interest, and penalties. The respondent argued they cleared waste & scrap on duty payment, challenging the show cause notices' sustainability.

The Tribunal found faults in the audit investigation, noting the lack of effort to verify explanations provided by the respondent. The adjudication lacked consideration of duty paid on waste & scrap, pivotal in demanding duty for alleged clandestine removal. The Ld. Commissioner (A) relied on respondent's explanations and lack of corroborative evidence from the Revenue to set aside the order. The Tribunal dismissed the Revenue's appeals, citing the faulty investigation and lack of evidence against the respondents.

The Ld. AR referenced various case laws, but the Tribunal deemed them irrelevant to the present case, as they involved seized goods or intercepted vehicles, unlike the audit-based presumption in this case. The Tribunal upheld the Ld. Commissioner (A)'s decision, emphasizing the absence of concrete evidence against the respondents. The faulty investigation and lack of substantiating evidence led to the dismissal of the Revenue's appeals.