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 ₹ 93,13,644/- is not correct. Denial of credit of ₹ 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.

Issues Involved:
1. Recovery of Central Excise Duty for clandestine clearances.
2. Recovery of wrongly availed and utilized Cenvat Credit.
3. Recovery of interest on Central Excise Duty and Cenvat Credit.
4. Imposition of penalties on various appellants.

Issue-wise Detailed Analysis:

1. Recovery of Central Excise Duty for Clandestine Clearances:
The appellants were accused of clandestine removal of goods without payment of Central Excise Duty amounting to ?93,13,644.47. The duty was confirmed based on the software records showing that spools had passed quality control tests and were ready for dispatch but were not entered in the RG-1 register. The appellant argued that the software showed the actual location of the spools, which were still in the production hall, and that the department had omitted this column in their evidence (RUD 22). The Tribunal found discrepancies in the stock calculations and noted the lack of independent corroborative evidence, such as excess raw material receipt, actual removal incidents, and buyer identification. The Tribunal concluded that the demand was not sustainable as the essential parameters for proving clandestine removal were not fulfilled.

2. Recovery of Wrongly Availed and Utilized Cenvat Credit:
The Cenvat Credit amounting to ?16,27,231/- was denied based on statements from suppliers indicating that only invoices were supplied without actual goods. The appellant contended that these statements were obtained under duress and requested cross-examination of the witnesses, which was not granted. The Tribunal noted that no transporter's statement was recorded to corroborate the claim and emphasized the need to address the appellant's allegations of duress and the absence of corroborative evidence.

3. Recovery of Interest on Central Excise Duty and Cenvat Credit:
Interest was ordered to be recovered under Section 11AB of the Central Excise Act, 1944, and Rule 14 of the Cenvat Credit Rules, 2004. The Tribunal's findings on the primary issues of duty and credit recovery implied that the interest recovery was also in question, pending the resolution of the main issues upon remand.

4. Imposition of Penalties on Various Appellants:
Penalties were imposed on the main appellant and co-appellants under various provisions of the Central Excise Act and Rules. The Tribunal found that the adjudicating authority had not provided sufficient evidence to substantiate the allegations of clandestine removal and wrongful credit utilization. The Tribunal directed the adjudicating authority to re-examine the evidence and provide cross-examination opportunities to the appellants.

Conclusion and Directions for Remand:
The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority with specific directions:
- Supply the copy of the hard disc and pen drive to ascertain the truthfulness of RUD 22.
- Address the issue of the quantity of winding wire on a spool and the discrepancy in stock calculations.
- Re-examine the evidence for denial of credit, including the cross-examination of witnesses.
The appeals were disposed of by way of remand, with instructions to the adjudicating authority to address the identified issues comprehensively.

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