2017 (3) TMI 546 - AT - Central Excise

Clandestine removal - M.S. Ingots falling under Chapter 72 of the Central Excise Tariff Act, 1985 - from monthly electricity bills, it was detected that the appellant had consumed electricity on an average of 1232 Units in the month of August, 2005 and 1570 Units in the month of September, 2005 for manufacture of Per M.T. of M.S. Ingots. However, the records recovered by the Department showed that the electricity consumption was between 688 and 691 Units PMT respectively - Held that - The law is well settled that in case of allegation of clandestine removal, the onus entirely lies on the Revenue to prove with the help of positive and complete evidence that the goods were in fact removed clandestinely by the assessee - in the present case, The Department has not brought any iota of evidence of receipt and utilization of excess raw-material in the clandestine manufacture of finished goods, manufacture of finished goods with reference to installed capacity, labour employed and payment made to them, clandestine removal of M.S. Ingots with reference to the vehicle for transportation of such goods, statement of lorry drivers , amount received from the buyers and their statement regarding receipt of M.S. Ingots without proper and valid invoices. Demand set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of Central Excise duty along with interest and penalty.
2. Allegation of clandestine removal of M.S. Ingots without payment of duty.
3. Validity of duty demand for the period from May, 2004 to July, 2005.
4. Reliance on electricity consumption as the sole criteria for confirmation of demand.
5. Burden of proof in cases of clandestine removal.

Analysis:

Issue 1:
The appeals were directed against the order confirming Central Excise duty of ?2,65,80,272/- along with interest and penalty imposed on the appellant company and its Director. The impugned order dated 30.04.2007 by the Commissioner of Central Excise, Jaipur was challenged before the Appellate Tribunal.

Issue 2:
The Department alleged that the appellant clandestinely removed M.S. Ingots without payment of duty based on discrepancies in electricity consumption records and private documents. The appellant partially accepted the duty liability and approached the Settlement Commission, which settled the dispute. The subsequent show cause notice demanded duty for the period from May, 2004 to July, 2005, alleging wide variations in electricity consumption and clandestine removal of M.S. Ingots.

Issue 3:
The impugned order confirmed the duty demand for the period from May, 2004 to July, 2005, based on discrepancies in electricity consumption records and private documents. The appellant challenged this confirmation, arguing that suppression during one period does not automatically infer suppression in earlier periods. The appellant relied on legal precedents to support their argument against the confirmed demand.

Issue 4:
The appellant contended that confirming duty demand solely based on electricity consumption was not sustainable. The Tribunal noted that electricity consumption varies and cannot be the sole criteria for confirming the duty demand. It was emphasized that tax cannot be levied based on estimation, and the fact of manufacture must be proven beyond doubt.

Issue 5:
In cases of clandestine removal, the burden of proof lies entirely on the Revenue to provide positive and complete evidence. The Tribunal held that the Department failed to prove clandestine removal with tangible, direct, and incontrovertible evidence. It was emphasized that the law requires proof beyond doubt in cases of clandestine manufacture and removal of excisable goods.

In conclusion, the Appellate Tribunal set aside the impugned order, holding that the demand of duty was not sustainable on merits. Consequently, the imposition of penalties on the appellant company and its Director was also set aside, and the appeal was allowed in favor of the appellant.

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