2016 (11) TMI 1344 - AT - Central Excise

Clandestine removal of goods - shortage in raw material - shortage in the stock of MS Scrap to the extent of 51.390 MT - shortage in manganese ore to the extent of 485.290 MT - Held that - It is well settled that the allegation of clandestine manufacture and removal are required to be discharged by the revenue by production of positive evidence. In the absence of the same such allegation cannot be upheld on the basis of assumptions and presumptions. The said legal principle does not require the support of any decision - appeal allowed - decided in favor of appellant.

Summary

Issues: Allegations of clandestine manufacture and removal of goods, confirmation of duty demand, imposition of penalties, inventory discrepancies, lack of positive evidence

Allegations of Clandestine Manufacture and Removal of Goods:
The appellant, engaged in manufacturing steel products, faced allegations of clandestine manufacture and removal of 211 MT of ferro manganese based on the detection of shortages in raw materials. The appellant contested the allegations, arguing that shortages were based on eye estimation without actual weighment. They also disputed the assumption that the shortages were used in manufacturing the final product due to lack of concrete evidence of production and sale.

Confirmation of Duty Demand and Penalties:
A show cause notice was issued proposing a demand of &8377; 11,94,039/- and denial of input service credit. The Additional Commissioner confirmed the duty demand and imposed penalties, a decision upheld by the Commissioner (A). However, the appellate tribunal found discrepancies in the inventory process and lack of concrete evidence linking shortages to clandestine activities, leading to the setting aside of the impugned order and allowing the appeal.

Inventory Discrepancies and Lack of Positive Evidence:
The tribunal noted the absence of inventory during the verification of raw material stock, raising doubts about the accuracy of the shortage detections. It emphasized the necessity of positive evidence to prove allegations of clandestine activities, highlighting the lack of employee statements, procurement records of other raw materials, or sales documentation. The tribunal stressed that allegations must be supported by concrete evidence rather than assumptions or presumptions to uphold duty demands and penalties.

Conclusion:
The tribunal, after considering arguments from both sides, concluded that the lack of inventories and substantial evidence undermined the allegations of clandestine manufacture and removal. Without concrete proof linking shortages to illegal activities, the tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.