2016 (10) TMI 449 - AT - Central Excise

Clandestine removal of goods - manufacture of winding wires - search conducted in the premises of appellant - demand of duty - denial of CENVAT credit - imposition of penalties - dispute in RUD 22 - requirement of various documents to arrive at the truth - Held that - no evidence been brought on record to allege clandestinely removal. It is well settled law that following parameters are essentially required to be proved for arriving at a conclusion of alleged clandestine removal (i) That excess raw material was received (ii) incidence of actual removal of finished goods (iii) identification of the alleged buyers of finished goods (iv) Factum of transportation of raw material as well as finished goods clandestinely (v) Receipt of sale proceeds through cheque or cash (vi) Use of excess electricity (vii) Statements of buyers with some details of illicit manufacture and clearance of finished goods (viii) Link between the private/internal records with the actual manufacture of the finished goods. None of the above parameters are fulfilled and therefore the impugned order qua demanding duty of Rs. 93, 13, 644/- is not correct. Denial of credit of Rs. 16, 27, 231/- on the ground that only invoices have been received in the factory and not the goods have been received - Held that - To find out truth whether the goods have been accompanied with the invoices or not the statement of the transporter is required but no statement of the transporter has been recorded by the revenue. The allegation of the appellant that the statement of Shri Manjeet Singh obtained under duress is required to be addressed by the adjudicating authority. Therefore the impugned order lacks merits. Demand of duty denial of CENVAT credit and imposition of penalties set aside - matter remanded - appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core issues considered in this judgment include:

• Whether the demand for Central Excise Duty amounting to 93,13,644/- on the grounds of clandestine removal of goods is justified.
• Whether the denial of Cenvat Credit amounting to 16,27,231/- is valid.
• Whether the penalties imposed on various parties are appropriate under the relevant rules and sections of the Central Excise Act and Cenvat Credit Rules.
• Whether the evidence and documents relied upon by the adjudicating authority were adequately verified and provided to the appellants.

ISSUE-WISE DETAILED ANALYSIS

1. Demand for Central Excise Duty on Clandestine Removal

• Relevant Legal Framework and Precedents: The demand was made under Section 11A of the Central Excise Act, 1944, invoking the extended period of limitation. The Tribunal referred to precedents that require specific parameters to be proven for clandestine removal, including receipt of excess raw materials, actual removal of goods, identification of buyers, and evidence of transportation and sale proceeds.
• Court's Interpretation and Reasoning: The Tribunal found that the adjudicating authority failed to provide sufficient evidence to support the claim of clandestine removal. The Tribunal emphasized the importance of fulfilling specific parameters for such allegations, none of which were met in this case.
• Key Evidence and Findings: The Tribunal noted discrepancies in the documents, particularly RUD 22, which was alleged to be truncated and distorted. The appellant argued that significant quantities were shown as lying in the production hall and not removed clandestinely.
• Application of Law to Facts: The Tribunal found the evidence insufficient to uphold the duty demand, highlighting the lack of corroborative evidence and the failure to address discrepancies in stock calculations.
• Treatment of Competing Arguments: The Tribunal considered the appellant's argument regarding the software's location column and the absence of corroborative evidence for clandestine removal. The Tribunal found these arguments persuasive.
• Conclusions: The Tribunal concluded that the demand for 93,13,644/- was not justified due to the lack of evidence and discrepancies in the documents.

2. Denial of Cenvat Credit

• Relevant Legal Framework and Precedents: The denial was based on Rule 14 of the Cenvat Credit Rules, 2004, and Section 11A of the Central Excise Act, 1944. The Tribunal referred to the need for corroborative evidence to deny credit.
• Court's Interpretation and Reasoning: The Tribunal questioned the reliability of statements obtained from suppliers, which were alleged to be under duress. The absence of transporter statements was noted as a significant gap in evidence.
• Key Evidence and Findings: The Tribunal found that statements from suppliers were not corroborated by independent evidence, such as transporter statements.
• Application of Law to Facts: The Tribunal determined that the denial of credit lacked merit due to the absence of corroborative evidence and the failure to address allegations of duress.
• Treatment of Competing Arguments: The Tribunal considered the appellant's contention regarding the duress and lack of corroboration, finding these arguments compelling.
• Conclusions: The Tribunal concluded that the denial of Cenvat Credit was not justified and required further examination.

3. Penalties Imposed

• Relevant Legal Framework and Precedents: Penalties were imposed under various sections of the Central Excise Act and Cenvat Credit Rules, including Sections 11AC and Rule 26(1).
• Court's Interpretation and Reasoning: The Tribunal's findings on the lack of evidence for duty demand and credit denial directly impacted the justification for penalties.
• Key Evidence and Findings: The Tribunal found the evidence insufficient to support the penalties imposed, particularly given the discrepancies and lack of corroboration.
• Application of Law to Facts: The Tribunal determined that penalties could not be sustained without sufficient evidence of the underlying violations.
• Treatment of Competing Arguments: The Tribunal considered the appellant's arguments regarding the lack of evidence and found them persuasive.
• Conclusions: The Tribunal concluded that the penalties were not justified and required reconsideration.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal emphasized the necessity of corroborative evidence and fulfillment of specific parameters for allegations of clandestine removal and denial of credit.
• Final Determinations on Each Issue: The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority with specific directions to address discrepancies, provide necessary documents, and allow cross-examination of witnesses.
• Verbatim Quotes of Crucial Legal Reasoning: "It is well settled law that following parameters are essentially required to be proved for arriving at a conclusion of alleged clandestine removal... none of the above parameters are fulfilled and therefore the impugned order qua demanding duty of 93,13,644/- is not correct."

The Tribunal remanded the case for further examination, directing the adjudicating authority to supply necessary documents, address discrepancies, and provide opportunities for cross-examination to ascertain the truthfulness of the allegations and evidence presented.