2017 (6) TMI 901 - AT - Central Excise

Clandestine manufacture and removal - shortage of stock - Held that - The first issue is with regard to shortage of 24.20 MTs found during the conduct of stock taking at the factory on 26.6.2003. Admittedly, there was no physical stock taking and comparison with the statutory record was done by mere eye estimation. It is the department s contention that the ingots manufactured are all regular sizes and therefore mere eye estimation was sufficient for such stock taking. That it was also not practically and logistically possible to get such huge stock weighed. When there is no physical stock taking by weighing the stock, we have to agree with the findings of the Commissioner (Appeals) that no credence can be placed on such eye assumption of the stock. This cuts the root of the department s case as the stock to be compared with the accounts and documents recovered is an assumptive figure. There is no evidence regarding excessive usage of raw materials or consumption of electricity by the respondents. Though the department allege that the respondents have procured excessive raw materials, from the discussions made as above, we have to say that there is no cogent evidence to establish that such huge quantity of raw materials was obtained by them. Consequently, we have to say that the allegation that they removed finished goods clandestinely without payment of duty, also does not sustain. In a large number of cases, it has been held that unless there is clinching evidence to establish clandestine removal, the demand cannot be confirmed solely on the basis of private records. Such private records have to be corroborated by evidence other than statements. Charge of clandestine removal being serious charge, the same has to be proved to a possible extent even though evidence to a mathematical precision may not be possible. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Shortage of 24.2 MTs during stock taking.
2. Alleged removal of four truckloads of ingots without invoices.
3. Alleged removal of two truckloads of ingots without invoices.
4. Unaccounted clearances based on documents from transporters.

Issue-wise Detailed Analysis:

1. Shortage of 24.2 MTs during stock taking:
The department alleged a shortage of 24.2 MTs based on eye estimation during stock taking on 26.6.2003. The Commissioner (Appeals) found that no physical stock weighing was conducted, making the eye estimation unreliable. The Tribunal agreed, stating that without actual weighing, the shortage claim lacks credibility.

2. Alleged removal of four truckloads of ingots without invoices:
The department relied on slips recovered from the factory gate, alleging the removal of 64.92 MTs of ingots on 25.6.2003. The Commissioner (Appeals) noted that no investigation was conducted at M/s. Bhuwalka Industries to verify the receipt of goods. The Tribunal found that the slips did not contain exact quantities and were not corroborated by evidence, thus agreeing with the Commissioner (Appeals) that these private records were unreliable.

3. Alleged removal of two truckloads of ingots without invoices:
Similar to the previous issue, the department alleged removal based on slips recovered from the factory gate. The Tribunal found that the department did not provide sufficient evidence to corroborate these claims, agreeing with the Commissioner (Appeals) that the slips alone were insufficient to prove clandestine removal.

4. Unaccounted clearances based on documents from transporters:
The department relied on statements and documents from transporters (TAT, RLT, STR) to allege unaccounted clearances. The Commissioner (Appeals) found that no corresponding lorry receipts were recovered, and no customers were contacted to verify the receipt of goods. The Tribunal agreed, noting that the evidence was based on assumptions and lacked corroborative support. The Tribunal also highlighted that the respondents provided evidence linking some clearances to accounted transactions, further weakening the department's case.

Conclusion:
The Tribunal upheld the order of the Commissioner (Appeals), finding no infirmity in the decision to set aside the demand and penalties. The appeal filed by the department was dismissed, emphasizing the need for corroborative evidence in cases of alleged clandestine removal. The judgment underscores that serious charges like clandestine removal require substantial proof beyond private records and assumptions.