2016 (10) TMI 823 - AT - Central Excise

Clandestine removal of goods - MS ingots - MS runners and riser - Held that - the appellant had taken the credit on the basis of invoices and in respect of the goods received in their factory. To confirm the demand on the basis of difference in figures in balance sheet and RG 1, without their being any further evidence either in the shape of statements of any of the employees of the appellant or in the shape of identifying the buyers, the transporters etc., the finding of clandestine activities cannot be upheld. It is well established principle of law that onus to discharge the burden in case of clandestine activities is upon the Revenue. In the present case, I find that sole basis of Revenue to raise the demand is a difference in the figures, as detected by the Audit, without their being any difference in the opening and closing balance. As such, I find no justification for upholding the impugned orders - appeal allowed - decided against Revenue.

Summary

Issues:
- Discrepancy in consumption of raw material between 3 CD and form IV registers
- Allegation of wrongly availed cenvat credit and clandestine removal of final product
- Confirmation of demand, disallowance of cenvat credit, interest, and penalties
- Appeal against Additional Commissioner's order upheld by Commissioner (Appeals)

Analysis:
1. The appellant, engaged in manufacturing MS ingots and runners, faced discrepancies in raw material consumption during an audit. The authorities alleged wrongful cenvat credit availed and clandestine removal of final products based on the differences in consumption recorded in the 3 CD and form IV registers.

2. The appellant contended that the discrepancies were clerical errors, supported by a CA certificate and documents showing no difference in raw material balances. They argued against suppressed production or clandestine removal, citing recycled scrap usage, clerical errors in accounts, and reliance on tribunal decisions for similar cases.

3. Despite the appellant's explanations, the Additional Commissioner upheld the demand, disallowing cenvat credit and confirming the allegations of clandestine activities. Penalties and interest were imposed, a decision later affirmed by the Commissioner (Appeals), leading to the appellant's appeal.

4. The appellate tribunal reviewed the case, considering the audit objections regarding raw material consumption differences. They highlighted the absence of discrepancies in opening and closing balances, emphasizing the Revenue's burden to prove clandestine activities. The tribunal cited precedents where differences in financial accounts and registers did not establish clandestine removal.

5. The tribunal found no substantial evidence supporting the Revenue's claims, overturning the previous decisions and allowing the appeal. The demand confirmation based solely on consumption discrepancies was deemed unjustified, leading to setting aside the impugned orders and granting consequential relief to the appellant.

6. As the appeal succeeded on its merits, other issues such as the plea of limitation were not addressed, and the tribunal concluded by pronouncing the judgment in favor of the appellant on 5/10/16.