2017 (6) TMI 103 - AT - Central Excise

Clandestine manufacture and removal - The main case of the Revenue against the respondent is that they have indulged in clandestine manufacture and clearance of excisable goods without payment of duty, in the guise of free replacement, goods rectified and returned, short supplied, samples etc. - Held that - the Commissioner(Appeals) has not given detailed justification for dropping the demands - it is clearly evident that description such as rectified and returned, short-supplied etc. indicated in the delivery challans are nothing but a camouflage to cover the fact that goods were being cleared clandestinely without payment of duty. Consequently, the Commissioner(Appeals) has erred in dropping such demands with the cryptic findings - Order-in-Original is restored - appeal allowed - decided in favor of Revenue.

Issues Involved:
Clandestine removal of excisable goods, duty demand confirmation, penalties imposed, procedural irregularities in demands raised, justification for dropping demands, documentary evidence to support claims, cryptic nature of impugned order.

Detailed Analysis:

1. Clandestine Removal of Excisable Goods:
The case involves manufacturers of chucks and parts availing SSI benefits facing allegations of clandestine removal of excisable goods. The Revenue contended that the goods were cleared under separate invoices and delivery challans not declared to the Department, using descriptions like "free replacement," "samples," and "short-supply." The investigation revealed discrepancies in the clearances, and duty demands were raised based on dispatch documents recovered from the assessee.

2. Duty Demand Confirmation and Penalties Imposed:
After investigation and show-cause notice, the Additional Commissioner confirmed a duty demand of ?10,52,737 for the period 11/1992 to 07/1997 due to clandestine removal. Penalties were imposed under Section 11AC and Rule 173Q, along with personal penalties on specific individuals. The Commissioner(Appeals) upheld demands for "free replacement" and "samples" but set aside demands for procedural irregularities and reduced penalties.

3. Procedural Irregularities in Demands Raised:
The Commissioner(Appeals) set aside demands under certain categories citing procedural irregularities. The Revenue challenged this decision, arguing that the impugned order lacked detailed reasoning and documentary evidence supporting claims of goods being short-supplied or returned after rectification was not provided by the respondent. The Revenue contended that duty should be charged in the absence of such documentary support.

4. Justification for Dropping Demands and Impugned Order:
The Tribunal found that the Commissioner(Appeals) did not provide detailed justification for dropping the demands. It was observed that descriptions like "rectified and returned" and "short-supplied" in delivery challans were used to conceal the clandestine clearance of goods without duty payment. The Tribunal concluded that the impugned order was cryptic and erred in dropping the demands without sufficient reasoning.

5. Documentary Evidence to Support Claims:
The Revenue emphasized the importance of documentary evidence to support claims of goods being short-supplied, rectified and returned, or sent as is. The absence of such documentary support led the Revenue to argue that duty should be charged. The Tribunal concurred with this view and reinstated the Order-in-Original, setting aside the impugned order.

In conclusion, the Tribunal allowed the Revenue's appeal, setting aside the impugned order and reinstating the Order-in-Original. The decision highlighted the significance of providing detailed justifications and documentary evidence in cases involving duty demands and procedural irregularities to ensure fair adjudication.

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