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2017 (3) TMI 997 - AT - Central ExciseClandestine removal - demand on the ground that the production of Sponge Iron was 1600 MTs per month. It was alleged that the Appellant company during this period has shown production of 1892.620 MT. only and thus, there is short recording of production of 4507.380 MT of Sponge Iron - Held that - the duty demand of ₹ 79,44,528/- has been confirmed merely on basis of statement of contractor with no iota of corroborative evidence. Except his statement of having done production, no other records or any corroborative evidence has been brought on record to prove clandestine removal of goods. Even the contractor could not produce his own records. No evidence in the form of procurement of excess raw material, production record, statement of any employee or owner, clearance of goods or receipt of any consideration towards such suppressed production has been relied upon - on the basis of contractors statement and especially in case, when even his own record is not produced, the demand cannot be sustained. Demand set aside - appeal allowed - decided in favor of appellant.
Issues:
Confirmation of Central Excise duty demand, penalties imposed on company and individuals, basis of duty demand, shortages of goods, sustainability of demand and penalties. Confirmation of Central Excise duty demand: The judgment involves appeals against an order confirming Central Excise duty demand, interest, and penalties imposed on a company engaged in manufacturing Sponge Iron and M.S. Ingots. The demand was based on alleged discrepancies in production records, with shortages of Sponge Iron and M.S. Ingots noted. The duty demand was contested on the grounds of lack of corroborative evidence supporting the allegations, reliance on contractor statements without substantial proof, and absence of evidence of clandestine removal of goods. The Tribunal found that the demand of duty amounting to ?79,44,528 was not sustainable due to insufficient evidence and lack of proof of goods being removed from the factory. Penalties imposed on company and individuals: Penalties were imposed on the company, its Director, and General Manager under Rule 26 of Central Excise Rules, 2002. The judgment highlighted the lack of substantial evidence to support the duty demand, emphasizing the importance of evidence of goods being removed from the factory to justify penalties. The Tribunal found that the penalties were not sustainable based on the lack of evidence of clandestine removal of goods and absence of proof linking shortages to duty evasion. Basis of duty demand: The duty demand was primarily based on statements from a contractor regarding production figures, which were contested by the appellant as assumptions without supporting evidence. The judgment emphasized the necessity of corroborative evidence to substantiate duty demands, highlighting the lack of records or proof of clandestine removal of goods. The Tribunal ruled that demands based solely on contractor statements and production slips were not sustainable without concrete evidence of duty evasion through removal of goods. Shortages of goods and sustainability of demand: The judgment addressed shortages of goods recorded by the company, which were contested as arising from estimation or formula basis rather than clandestine removal. The appellant argued that shortages alone should not lead to duty demands without evidence of goods being removed without payment. The Tribunal held that demands arising from shortages were not sustainable without evidence of removal of goods without payment of duty. It cited previous judgments to support the view that shortages alone were insufficient grounds for duty demands in the absence of proof of clandestine removal. In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellant due to the lack of sustainable evidence supporting the duty demand and penalties. The judgment emphasized the necessity of concrete proof of goods being removed without payment of duty to justify duty demands and penalties, highlighting the importance of corroborative evidence in such cases.
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