2017 (5) TMI 609 - AT - Central Excise

Shortages of goods - clandestine removal - Polyster Texturised Yarn - demand of duty - penalty - Held that - The demands are based upon the comparison of computer sheets with the RG -1 and also some of the shortages was arrived at physical verification. The statements of the Assistant Manager Shri Madhusudan Tibrewalla has been relied upon to show that since he had accepted the shortage in case of some of the goods, hence duty is payable - it is not the case of the revenue that the goods were not returned back to Silvassa Unit after jobwork or that the goods were cleared elsewhere without payment of duty. Even the GRN and delivery challans related to processing of goods were not held to be forged or invalid which clearly shows that the goods were indeed jobwork goods. In such case when there is no evidence of goods elsewhere, there is no reason to uphold the demand against Appellant Unit - The absence of challan or documents towards reprocessing cannot be a ground to allege shortages and demand duty - Mere shortages in stocks would not ipso facto lead to demand on account of clandestine removal. No evidence in the form of procurement of any excess raw material, production of goods, clearance and transportation evidence of such alleged short found quantity, receipt of consideration on account of clandestine clearance has been brought on record. Since in the present case no evidence of clandestine removal of goods has been brought on record by supporting corroborative evidences, there is no merit in the impugned order - demand set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand of duty on shortages found in stock.
2. Allegations of clandestine removal of goods.
3. Imposition of penalties on the company and its directors/employees.

Issue-wise Detailed Analysis:

1. Demand of Duty on Shortages Found in Stock:
The appellant, M/s Welspun Polyesters (I) Ltd., was issued a show cause notice on 15.09.1995 demanding duty on shortages found in stock. The shortages were identified based on the difference between computer sheets and the RG-1 Register, as well as physical verification. The Assistant Manager, Shri Madhusudan Tibrewal, accepted some of the shortages in imported POY and explained that shortages in indigenous stock were due to material issued for texturizing purposes, which was not accounted for correctly. The adjudicating authority confirmed the proposals of the show cause notice, leading to the present appeals.

2. Allegations of Clandestine Removal of Goods:
The revenue alleged that the shortages were due to clandestine removal of goods. The appellant contended that the shortages were either clerical errors or due to legitimate reasons such as job work, rewinding of yarns, and production during strike periods. The adjudicating authority did not accept these explanations, citing lack of documentation and discrepancies in lot numbers. However, the tribunal found that there was no evidence of goods being removed clandestinely, as there was no proof of illegal procurement of raw materials, utilization of power, deployment of labor, transportation of goods, or receipt of consideration. The tribunal emphasized that mere shortages in stock do not ipso facto lead to a conclusion of clandestine removal without concrete evidence.

3. Imposition of Penalties on the Company and Its Directors/Employees:
Penalties were imposed on M/s Welspun Polyesters (I) Ltd. and its directors/employees, including the Managing Director, Executive Director, and Assistant Manager. The tribunal, however, found no merit in the impugned order as there was no substantial evidence to support the allegations of clandestine removal. The tribunal cited several judgments, including Nova Pharmaceuticals Pvt. Ltd. Vs. CCE and Vishwa Traders Pvt. Ltd Vs. CCE, which establish that allegations of clandestine removal must be supported by concrete and tangible evidence. In the absence of such evidence, the tribunal set aside the demand and penalties imposed on the appellants.

Conclusion:
The tribunal concluded that the revenue failed to provide sufficient evidence of clandestine removal of goods. The discrepancies and shortages identified were attributed to clerical errors or legitimate production processes. Consequently, the tribunal set aside the demand and penalties imposed on M/s Welspun Polyesters (I) Ltd. and its directors/employees, allowing the appeals with consequential reliefs. The judgment underscored the necessity of concrete evidence to substantiate allegations of clandestine removal.

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