2017 (5) TMI 612 - AT - Central Excise

Clandestine manufacture and removal - aluminium scrap - Held that - the demand against REPL and SEPL were confirmed only on the assumption and presumption that they might have manufactured and cleared the goods clandestinely - Even though it is accepted the JRD Bangalore has removed the aluminium scrap but no investigation has been carried out, as regards the receipt of such aluminium scrap by the aforesaid manufacturers and manufacture of goods out of said scrap. Therefore, in the absence of any investigation and evidence regarding receipt, manufacture and clearance of goods by the appellant, the demand was rightly set aside by the Commissioner (Appeals) - demand set aside - appeal rejected - decided in favor of assessee.

Issues:
1. Alleged diversion of imported aluminium scrap.
2. Confirmation of demand and imposition of penalties.
3. Lack of investigation on alleged recipients.
4. Appeal based on litigation policy for amounts below ?10 lakhs.

Issue 1: Alleged diversion of imported aluminium scrap
The case involved an investigation by the DGCEI, Zonal Unit, Mumbai, which revealed a modus operandi where a Bangalore-based firm was purchasing imported aluminium scrap on high sea sales basis and diverting it to actual manufacturers. Show-cause notices were issued to the manufacturing units, alleging receipt of the scrap and clandestine clearance of manufactured goods. The Commissioner (Appeals) allowed the appeal, stating that investigations focused on the firm purchasing the scrap, not the alleged recipients who were the manufacturers. The Revenue challenged this decision.

Issue 2: Confirmation of demand and imposition of penalties
The Revenue argued that investigations established the clandestine sale of aluminium scrap to the manufacturing units, leading to clandestine manufacturing and clearance of goods. However, the appellant contended that there was no investigation into the receipt of scrap or the manufacturing and clearance of goods, rendering the demand baseless and unsustainable. The original authority confirmed the demand and imposed penalties, which were later set aside by the Commissioner (Appeals).

Issue 3: Lack of investigation on alleged recipients
The Tribunal noted that the demand against the manufacturing units was based on assumptions and presumptions without concrete evidence of receipt, manufacture, and clearance of goods. The Commissioner (Appeals) found that the show-cause notice lacked conclusive proof of the alleged activities and failed to frame charges, leading to the setting aside of the demand, interest, penalties, and confiscation orders.

Issue 4: Appeal based on litigation policy for amounts below ?10 lakhs
The appeals by other parties involved amounts below ?10 lakhs, falling under the Government's litigation policy. As per Circular No.390/MISC/163/2010-JC, such appeals were liable to be dismissed. The Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeals against the manufacturing units and the appeals involving amounts below ?10 lakhs.

In conclusion, the Tribunal dismissed the Revenue's appeals due to the lack of evidence and investigation regarding the alleged diversion of imported aluminium scrap and clandestine manufacturing and clearance of goods by the manufacturing units. The decision highlighted the importance of concrete evidence and proper investigation in confirming demands and imposing penalties. Additionally, the adherence to the Government's litigation policy led to the dismissal of appeals involving amounts below ?10 lakhs.

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