2017 (6) TMI 470 - AT - Central Excise

Confiscation of Indian currency from the father of sole proprietor of assessee - confiscation with redemption fine and penalty - shortage of cpooer-scrap from factory premises of appellant-assessee - case of Revenue is that the said currency was the sale proceeds of goods cleared clandestinely - Held that - it is not clear as to whether actually a physical weighment has been made of the stock of raw-material. Admission of the authorized representative by signing the Panchnama is the sole reason recorded by the original authority to uphold the shortage of raw-material. Even considering that there is such shortage, that cannot be automatically converted into a charge of un-accounted manufacture and clearance of excisable final product. - The appellant assessee indicated that the records maintained by Shri Girish Chand as a labour contractor is with reference to number of labourers working per heat in the appellant - assessees unit. We find that these basic facts were not examined in right prospective and commented upon by the original authority. This has significantly weakened the case of Revenue. The case of un-accounted manufacture and clearance is built upon certain sketchy evidences as narrated above, without any concrete corroboration. While the cases of clandestine removal cannot be precisely proved with 100% corroborative evidences, it is essential to have at least standard evidence which will clearly show the existence of un-accounted manufacture and clearance - In the present case, whatever evidences formed basis for the case of the Revenue are falling short of minimum requirement of credible case of clandestine removal. Since the case against the appellant-assessee could not be established regarding un-accounted clearances, the seizure and confiscation of Indian Currency and penal proceedings against the appellant assessee will also fail. Demand for un-accounted clearance of copper wire rods - Held that - It is clear that on physical verification of the premises of the appellant assessee on 21.05.2005, no rolling mill was installing in the factory. No evidence has been placed in the proceedings before the lower authority to the effect that the appellant assessee got wire rods manufactured by using some other s facility. As such, we find no merit in the appeal by the Revenue. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues Involved:
1. Demand of Central Excise duty on alleged unaccounted clearance of copper ingots.
2. Confiscation of Indian currency seized from the residence of the father of the sole proprietor of the assessee.
3. Imposition of penalty on the assessee.
4. Dropping of duty demand on clearance of copper wire rods.

Issue-wise Detailed Analysis:

1. Demand of Central Excise duty on alleged unaccounted clearance of copper ingots:
The Department issued a show cause notice alleging that the assessee had been receiving substantial quantities of copper scrap without proper documentation and was not entering the same in its statutory records. It was further alleged that the scrap was used to manufacture ingots, which were then cleared without payment of duty. The demand was based on documents recovered from the factory premises and statements recorded from various individuals. The assessee contested the demand, arguing that the stock verification of copper scrap was done arbitrarily based on eye estimation rather than actual weighment. The Tribunal noted that the methodology adopted for stock verification was questionable and that the admission of shortage by the authorized representative could not automatically convert into a charge of unaccounted manufacture and clearance. The Tribunal found that the evidence presented by the Revenue, including documents and statements from third parties, was insufficient to establish a credible case of clandestine removal. The Tribunal emphasized that tangible evidence, such as excess raw materials, actual removal of unaccounted finished goods, and proof of transportation, was necessary to support such a charge. Consequently, the demand for clandestine removal of copper ingots was not sustained.

2. Confiscation of Indian currency seized from the residence of the father of the sole proprietor of the assessee:
During the search of the residential premises, Indian currency amounting to ?6,20,000/- was seized, which the Department claimed was the sale proceeds of goods cleared clandestinely. The assessee argued that ?6,08,000/- was the cash-in-hand of the firm of Mrs. Ritu Gupta, duly reflected in her income tax return, and the balance was for household expenses. The Tribunal found that since the case against the assessee regarding unaccounted clearances could not be established, the seizure and confiscation of the Indian currency also failed.

3. Imposition of penalty on the assessee:
A penalty equal to the demand of duty was imposed on the assessee under Section 11AC. However, since the Tribunal did not sustain the demand for clandestine removal of copper ingots, the imposition of penalty was also set aside.

4. Dropping of duty demand on clearance of copper wire rods:
The Revenue appealed against the dropping of the duty demand on the clearance of copper wire rods, arguing that the assessee got wire rods manufactured using hired labor. The original authority had found that the assessee did not possess the required machinery for converting ingots into copper wire rods. The Tribunal upheld the original authority's finding, noting that no evidence was presented to show that the assessee got wire rods manufactured using another facility. Consequently, the appeal by the Revenue was dismissed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, setting aside the demand for clandestine removal of copper ingots, the confiscation of Indian currency, and the imposition of penalty. The Tribunal dismissed the appeal filed by the Revenue regarding the dropping of the duty demand on copper wire rods.