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2017 (5) TMI 616 - AT - Central ExciseClandestine removal - Shortage of raw material and finished goods - excess quantity of wire mesh - seizure - seizure of cash - CENVAT credit - difference in quantum of the goods produced as reflected in RG-1 register and accounted in private records recovered by the departmental officers from their head office - certain quantity of inputs were seen entered in the RG 23A register but there was no entries in the private records accounting receipt of the inputs - removal of certain quantity of inputs which were entered in their private records without reversal of the credit. Held that - the shortage of 242.465 MT in stock weight against the total purchase of raw material from 2001 to September 2007 of 57099.535 MT came to 0.42% which itself has been over a period six years. In that circumstance, the charge of shortage of finished goods/raw materials are not sustainable - although the shortages were found but it has not been alleged that the goods cleared clandestinely. Moreover, the manufacturing process of the appellant reveal that there should be some wastage and considering the shortage which detected in six years is miniscule to 0.42% without any corroborative evidence for clandestine removal of the goods, the duty on shortages cannot be confirmed. Further taking into consideration the shortages of finished goods are not sustainable consequently the demand of duty on finished goods is not sustainable - demand set aside. Demand of ₹ 58,72,851/- confirmed on account alleged clandestine product - Held that - the demand is not sustainable on the basis of difference between production slips and RG-1 register - it has not been coming out form the facts of the case that for manufacturing these quantities from where the raw material procured, how much electricity used and how the payment of these goods have been received, how the goods have been transported, therefore, in the absence of any corroborative evidence the demand sought to be confirmed on the bass of assumption and presumption is not sustainable - We further find that the demand has been confirmed on the basis of private registers and RG-1 register, the department did not raise any demand in the show cause notice dated 4.4.2008. Therefore, this demand cannot be confirmed by invoking the extended period of limitation - demand set aside. With regard to the credit of ₹ 83,09,894/-, the allegation of the department is that although the goods have been entered in RG-1 register and they did not find mention in the private records - it is alleged the appellants have diverted the quantities of goods without reversal of the credit - Held that - As the Revenue has not given any evidence for diversion of inputs, merely on the basis of presumption the inputs is not find place in private records, the demand is not sustainable, therefore, we hold that the demand of ₹ 83,09,894/- is not sustainable against the appellant - demand set aside. With regard to the disallowance of the credit of ₹ 1,34,67,629/-, the contention of the Revenue is that the appellant has cleared goods without reversal of the credit - Held that - The Revenue has not produced any evidence for the Cenvat Credit taken on this quantity of goods, therefore, the question of reversal of credit does not arise. In that circumstance - it is admitted fact that the appellant is engaged in trading activity of wire rods and it is also fact on record that the quantities of wire rods cleared as such, the appellant has not taken the credit. In that circumstance, the question of reversal of credit does not arise - demand set aside. Extended period of limitation - Held that - on the same investigation and after completion of enquiry, a show cause notice dated 4.4.2008 was issued to the appellant to demand duty on the basis of alleged shortage and non payment of duty and cash recovered during the course of investigation. Thereafter, subsequent show cause notice dated 30.3.2008 was issued to the appellant - the facts of the case in the knowledge of the department at the time of issuance of show cause notice on 4.4.2008 and no new facts revealed - The show cause notice dated 30.3.2009 cannot be issued to the appellant by invoking the extended period of limitation. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Demand of duty due to alleged shortage of raw materials and finished goods. 2. Demand of ?58,72,851/- on account of alleged clandestine removal of goods. 3. Demand of ?83,09,894/- for alleged diversion of inputs without reversal of credit. 4. Disallowance of credit amounting to ?1,34,67,629/- for alleged clearance of raw materials without reversing the credit. 5. Penalties imposed on the appellants. Detailed Analysis: 1. Demand of duty due to alleged shortage of raw materials and finished goods: The appellants contended that the alleged shortages were due to errors in stock recording and certain transactions not being accounted for properly. They highlighted that the shortages amounted to only 0.42% over a period of six years, which is negligible. The Tribunal referred to the case of H.M. Pipes Pvt. Ltd., where it was held that minor discrepancies in stock over long periods do not justify a demand for duty without evidence of clandestine removal. Consequently, the Tribunal found the duty demand on alleged shortages unsustainable. 2. Demand of ?58,72,851/- on account of alleged clandestine removal of goods: The demand was based on discrepancies between production slips and the RG-1 register. The appellants explained that the production of various gauges of HB wire involved multiple processes, which could result in apparent discrepancies. The Tribunal emphasized the need for corroborative evidence, such as records of raw material procurement, electricity usage, labor employment, and transportation, which were absent in this case. Citing the case of R.A. Castings Pvt. Ltd., the Tribunal held that the demand could not be sustained based on assumptions and presumptions without concrete evidence. 3. Demand of ?83,09,894/- for alleged diversion of inputs without reversal of credit: The appellants argued that the inputs were duly entered in the RG-1 register and used in the manufacture of finished goods. The Tribunal noted the absence of evidence for the alleged diversion of inputs and referred to the case of Narendra Impex, where it was held that discrepancies in private records do not override statutory records unless there is evidence of diversion. Therefore, the demand was found unsustainable. 4. Disallowance of credit amounting to ?1,34,67,629/- for alleged clearance of raw materials without reversing the credit: The appellants contended that they had not availed credit on the quantities cleared as such, as these were trading activities. The Tribunal found that the Revenue had not provided evidence of credit being taken on these quantities. Hence, the demand for reversal of credit was deemed unsustainable. 5. Penalties imposed on the appellants: Given that the demands were found unsustainable, the penalties imposed on the appellants were also set aside. Conclusion: The Tribunal concluded that the show cause notice dated 30.03.2009 could not invoke the extended period of limitation, as it was based on the same investigation as the earlier notice dated 04.04.2008. All demands and penalties were set aside, and the appeals were allowed with consequential relief.
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