2017 (8) TMI 96 - AT - Central Excise

Clandestine removal - shortage of finished goods - the demand of 1, 77, 922/- have been confirmed in respect of finished goods which were found short vis.-a-vis the balance recorded in the RG-1 register - Held that - Although the authorised representative of the appellant could not immediately explain such apparent shortage it does not lead to the inevitable conclusion in absence of corroborative evidence that the appellant have indulged in clandestine clearance of such shortage. Further the loose slips found at the time of search maintained with respect to activity of the production floor are private report/records and the same are not reliable for drawing adverse conclusion against the appellant in absence of any corroborative evidence of clandestine manufacture and removal. Further I find that save and except assumption and presumption of clandestine removal for the apparent shortage no clandestine activity and evidences have been brought on record. Under such facts on record I find that the allegation of clandestine removal is not established - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of ?7,66,922/- under Section 11A of the Act with equal penalty under Rule 25 of Central Excise Rules, 2002.
2. Alleged shortage of finished goods valued at ?10,90,207/-.
3. Alleged clandestine removal of goods based on loose paper slips.
4. Eligibility for SSI exemption under Notification No.08/2003.

Detailed Analysis:

1. Demand of ?7,66,922/- under Section 11A of the Act with equal penalty under Rule 25 of Central Excise Rules, 2002:
The appeal was filed against an order confirming the demand of ?7,66,922/- under Section 11A of the Act, with an equal amount of penalty under Rule 25 of Central Excise Rules, 2002, along with interest. The Tribunal found that the demand was based on assumptions and lacked corroborative evidence of clandestine manufacture and removal. The Tribunal set aside the impugned order, allowing the appeal and entitling the appellant to consequential benefits.

2. Alleged shortage of finished goods valued at ?10,90,207/-:
During a visit by Central Excise officers, a shortage of finished goods valued at ?10,90,207/- was noted. The appellant's authorized signatory could not provide a valid explanation for the shortage. The Tribunal observed that the shortage alone, without corroborative evidence, did not lead to the inevitable conclusion of clandestine clearance. The Tribunal emphasized that mere suspicion or assumptions cannot substantiate such allegations.

3. Alleged clandestine removal of goods based on loose paper slips:
Loose paper slips recovered during the search indicated production not recorded in the statutory RG-1 register, suggesting suppression of production and clandestine removal. The appellant argued that these slips were related to primary packing and not reliable for drawing adverse conclusions. The Tribunal noted that reliance on private/internal records without corroborative evidence, such as statements of buyers or proof of transportation, is insufficient to establish clandestine removal. The Tribunal cited the ruling in Arya Fibres Pvt. Ltd. Vs Commissioner of Central Excise, Ahmedabad, emphasizing the need for tangible evidence beyond mere inferences.

4. Eligibility for SSI exemption under Notification No.08/2003:
The appellant was initially denied SSI exemption under Notification No.08/2003, as they were using the brand name 'Panchwati' belonging to another entity. However, the Additional Commissioner dropped the demand of ?32,64,000/- for disallowing the SSI exemption, noting that the Trade Mark 'Panchwati' was registered in the name of the appellant and others. The Tribunal upheld this finding, confirming the appellant's eligibility for SSI exemption under the said notification.

Conclusion:
The Tribunal set aside the impugned order confirming the demand of ?7,66,922/- and penalty, allowing the appeal. The Tribunal emphasized the lack of corroborative evidence for allegations of clandestine removal and the appellant's entitlement to SSI exemption. The appellant was granted consequential benefits in accordance with the law.