2017 (2) TMI 1138 - AT - Central Excise

Clandestine removal - no panchnama was drawn while physical verification of the stock - Held that - As panchnama is the prime document to record the stock verification and the same has not been drawn in the case. Therefore, it is doubted that whether any physical verification of stock done or not. In the absence of the panchnama, adverse inference cannot be drawn against the respondent - further, the computer prints have been relied upon to alleged clandestinal removal of goods but no procedure prescribed u/r 36 (B) CEA, 1944 has been followed. Therefore, the computer prints out are not reliable documents - the charge of the clandestinal removal of goods is not sustainable - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against dropping charge of clandestine removal of goods by the Commissioner (Appeals).

Analysis:
The Revenue filed appeals challenging orders where the Commissioner (Appeals) dropped the charge of clandestine removal of goods against the respondent. The case involved a shortage of C.R. Sheets/H.R. Sheets and scrap during a physical stock verification. A show cause notice was issued based on discrepancies in production figures and finished goods receipts. The duty demand, interest, and penalties were imposed on both respondents. The Tribunal affirmed the Commissioner's order, but the High Court remanded the matter for fresh consideration.

The Appellate Tribunal considered arguments from both sides. The Revenue claimed stock verification was satisfactory, with active participation from employees and the Company Director. The computerized records were allegedly generated later but were printed in the presence of an Accounts Assistant. The respondent's counsel argued that physical verification was not conducted, and the verification report was based on eye-estimation. They contended that the shortage of raw materials did not affect finished goods production and questioned the reliability of computer prints.

Upon careful consideration, the Tribunal noted the absence of a panchnama to certify physical verification and doubted its completion. The reliance on computer prints for alleging clandestine removal was questioned due to non-compliance with prescribed procedures. Consequently, the Tribunal found the charge of clandestine removal unsustainable against the respondents. The impugned order was upheld, dismissing the Revenue's appeals.