2016 (10) TMI 951 - AT - Central Excise

Clandestine removal of goods - shortage of goods - non-alloy steel ingots - cenvatable scrap - raw material - confiscation of currency - imposition of penalty - Held that - it is clear that the law is well-settled that in cases of clandestine manufacture and clearance certain fundamental criteria have to be established by Revenue which mainly are the following (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of (a) Raw materials in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of sale of such goods to identified parties; (e) Receipt of sale proceeds whether by cheque or by cash of such goods by the manufacturers or persons authorized by him; (f) Use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) Statements of buyers with some details of illicit manufacture and clearance; (h) Proof of actual transportation of goods cleared without payment of duty; (i) Links between the documents recovered during the search and activities being carried on in the factory of production; etc - nothing has been brought on record with corroborative evidence to allege clandestine removal against the appellant. Confiscation of currency - The seized currency during the course of investigation cannot be confiscated without proving that the said seized currency is the sale proceeds of excisable goods cleared clandestinely. Therefore we hold that absolute confiscation of the seized currency of 47, 00, 000/- is not sustainable accordingly the confiscation is set aside and the Adjudicating Authority is directed to release the said amount immediately to the appellants. The demands against the appellants not sustainable - penalty on all the appellants not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of duty on account of shortage of raw material/finished goods.
2. Demand of duty on account of clandestine removal of goods.
3. Absolute confiscation of currency recovered from the residential premises.
4. Imposition of penalties on all appellants.

Issue-wise Detailed Analysis:

1. Demand of Duty on Account of Shortage of Raw Material/Finished Goods:

- SSCL: The demand of duty amounting to ?4,42,243 was confirmed on account of shortages of raw material and finished goods. The Tribunal found that the duty was demanded on the shortage of melting scrap of 50.140 MT without alleging that this raw material was used in manufacturing final products cleared without payment of duty. As duty can only be demanded on manufactured goods, the demand on raw material was deemed unsustainable and set aside.

- SSSM: The demand of duty was confirmed on account of a shortage of raw material. The Tribunal noted that the Adjudicating Authority did not consider that the appellant used both cenvatable and non-cenvatable inputs. Since the duty was demanded on raw material, which is not a manufactured good, and there was no evidence that the raw material was used for manufacturing final products, the demand was set aside.

- SSIL: The demand of duty was confirmed on both inputs and finished goods. The Tribunal found that the Adjudicating Authority did not prove that the inputs found short were used in manufacturing final products. The shortage of finished goods was calculated on an average basis, leading to a meager shortage of 7.742 MT. In the absence of corroborative evidence, the demand of duty on the shortage of raw material and finished goods was set aside.

2. Demand of Duty on Account of Clandestine Removal of Goods:

- SSCL: The demand of ?77,52,160 was confirmed on account of clandestine removal of goods to M/s Raghav Enterprises. The Tribunal found that the allegation was based solely on the statement of Shri Suresh Aggarwal of M/s Raghav Enterprises, without corroborative evidence. The Tribunal cited the decision in Raipur Forging Pvt. Ltd. vs. CCE, Raipur - I, emphasizing the need for tangible evidence of clandestine manufacture and clearance. As no such evidence was provided, the demand was set aside.

3. Absolute Confiscation of Currency:

- ?47,00,000 Recovered from Shri Sunny Garg and Shri Kewal Garg: The Tribunal noted that the Adjudicating Authority presumed the cash as sale proceeds of clandestine goods without proving it. The Tribunal held that in excise cases, goods cannot be absolutely confiscated, and hence, the sale proceeds cannot be confiscated without proof. The confiscation of the currency was set aside, and the Adjudicating Authority was directed to release the amount immediately.

4. Imposition of Penalties:

- Penalties on Appellants: As the demands against the appellants were found unsustainable, the penalties imposed on all appellants were also deemed unsustainable and set aside.

Conclusion:

The Tribunal set aside the impugned order, finding that the demands of duty on account of shortages and clandestine removal were not supported by sufficient evidence. The absolute confiscation of currency was also found contrary to law. Consequently, all penalties imposed on the appellants were set aside, and the appeals were allowed with consequential relief.