2016 (9) TMI 940 - AT - Central Excise

Imposition of penalty - Section 11AC of Central Excise Act, 1944 - raw materials and finished goods - found short in the appellant premises - clandestine removal of goods - Held that - it is a fact that Revenue is solely relying upon the shortages. There is virtually no other evidence to reflect upon the manufacture of appellant s final product, their transportation, recognition of the buyers and receipt of sales proceeds by allegedly clandestine removed goods. In the absence of such evidence and in the light of precedent decision of the Tribunal, which stand discussed in detail by the Commissioner (Appeals), the charges of clandestine removal cannot be held to have been established. The onus to prove clandestine removal is admittedly on the Revenue and is required to be discharged with production of sufficient evidence, which at least may lead to the probability of having removed the goods. As such, I am of the view that the findings arrived at by the lower authorities that shortages by itself cannot held to be clandestine removal of goods is appropriate decision, thus not requiring any interference with. Confiscation - Rule 15 of the Cenvat Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002 - raw materials and scrap - found in excess quantity - Held that - it is found that it stand recorded by the authorities below that there was no evidence to show that such non-recording in the statutory records was on account of any malafide. Neither were the goods in process of being removed nor is there any sufficient material to show that same were meant for removal without payment of duty. As such, I find no justification for the confiscation of the same as prayed for by the Revenue. - Decided against the Revenue

Summary

Issues:
1. Imposition of duty demand and penalty on the appellant for shortages in raw materials and final products.
2. Confiscation of excess found goods and imposition of penalty under Cenvat Credit Rules and Central Excise Rules.
3. Appeal by Revenue against the order of Additional Commissioner regarding penalty and confiscation.

Analysis:
Issue 1: The appellant, engaged in manufacturing HB wire and binding wire, was subject to proceedings due to shortages in raw materials and final products found during a visit by Central Excise officers. The show cause notice proposed duty demand and penalty under Central Excise Rules. The original authority confirmed the duty demand but imposed a penalty for improper record maintenance, not finding evidence of clandestine removal or malafide intention.

Issue 2: The Revenue appealed against the penalty decision, arguing for the imposition of a penalty equivalent to the duty amount and confiscation of excess goods. The Commissioner (Appeals) rejected the appeal, stating that shortages alone did not prove clandestine activities. The appellate authority found no evidence of clandestine removal or malafide intent, leading to the rejection of the Revenue's plea for penalty and confiscation.

Issue 3: The Revenue's appeal was based on the argument that shortages indicated clandestine activities, justifying penalty and confiscation. However, the Tribunal found no substantial evidence beyond shortages to support clandestine removal. The absence of evidence regarding manufacturing, transportation, sales, and buyers of allegedly removed goods led to the rejection of the Revenue's appeal. The Tribunal upheld the lower authorities' decisions, emphasizing the lack of proof for clandestine activities.

In conclusion, the Tribunal dismissed the Revenue's appeal, as shortages alone were not sufficient to establish clandestine removal without additional evidence. The decision highlighted the importance of substantial evidence to prove clandestine activities, ultimately upholding the lower authorities' findings regarding penalties and confiscation.