2017 (9) TMI 1057 - AT - Central Excise

Clandestine removal - Medicines - SSI exemption - The case of the Revenue is based on rough register maintained by Chemist Shri R A Singh - Held that - the presumption taken by the revenue that such quantity has been produced is without any positive evidence - demand has been confirmed against the assessee based on Annexure D to the show cause notice which shows that entries made in the register as well as entries made in RG 1 register and difference thereof is demanded. Revenue has failed to explain why there are double entries and why they have taken the quantity as cleared clandestinely and how the quantity was arrived. No corroborative evidence has been produced by the Revenue. Therefore, the said register maintained by Chemist is a rough register and the same cannot be a piece of evidence to allege clandestine clearance of goods and in the absence of corroborative evidence - the said register cannot be the basis of clandestine removal of goods. Certain statements were also relied upon to allege clandestine clearance of goods by the assessee. the said statements cannot be relied upon in the absence of any corroborative evidence. No other corroborative evidence has been produced by the Revenue to allege clandestine clearance of the goods - appeal dismissed - decided against Revenue.

Issues Involved:
1. Allegation of clandestine clearance of medicines without payment of duty.
2. Entitlement to SSI exemption under Notification No. 8/2003 CE dated 1.3.2003.
3. Reliability of the register maintained by the chemist as evidence.
4. Validity of statements recorded during the investigation.
5. Confirmation of demand and imposition of penalty.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Clearance of Medicines Without Payment of Duty:
The Revenue alleged that the assessee was engaged in the clandestine clearance of medicines without paying the required duty during the period from September 2004 to July 2007. This allegation was primarily based on a register maintained by Shri R.A. Singh, a chemist, which contained entries marked as 'MSP' and 'MSP(P)'. The entries marked 'MSP(P)' were purportedly cleared without invoices, leading to the claim that these goods were clandestinely cleared. The adjudicating authority confirmed the demand based on these entries and imposed an equivalent amount of penalty.

2. Entitlement to SSI Exemption Under Notification No. 8/2003 CE Dated 1.3.2003:
The Commissioner (Appeals) held that the assessee was entitled to SSI exemption for the periods 2004-2005 and 2007-2008, as the total turnover, including the alleged clandestine clearances, remained within the exemption limit. However, for the periods 2005-2006 and 2006-2007, the demand to the tune of ?36,42,502/- was confirmed. The assessee appealed against this confirmation, while the Revenue appealed against the dropping of the demand for 2004-2005 and 2007-2008.

3. Reliability of the Register Maintained by the Chemist as Evidence:
The assessee contested the reliability of the register maintained by Shri R.A. Singh, arguing that it was a rough register and not a statutory record. The register's entries, particularly those marked with 'P', were explained as related to goods received back for reprocessing and not indicative of clandestine clearance. The Tribunal found discrepancies in the register and noted that the Revenue failed to provide corroborative evidence to support the claim of clandestine clearance. The Tribunal referred to the case of CCE, Surat Vs. Tulsi Polymers Pvt. Ltd., which held that clandestine removal must be established by sufficient records, not merely rough entries.

4. Validity of Statements Recorded During the Investigation:
The statements of various individuals, including Shri Sudhir Natani and Shri Sanjay Sharma, were relied upon by the Revenue. The assessee argued that these statements were misinterpreted and lacked corroborative evidence. The Tribunal noted that the statements alone could not establish clandestine clearance without additional supporting evidence, as held in the case of Davinder Sandhu Impex Ltd. Vs. CCE.

5. Confirmation of Demand and Imposition of Penalty:
The Tribunal found that the demand was confirmed based on assumptions and presumptions without positive evidence. The discrepancies in the register and the lack of corroborative evidence led to the conclusion that the register could not be used to allege clandestine clearance. Consequently, the Tribunal set aside the demand and penalty imposed on the assessee.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, setting aside the demand of duty and the imposition of penalty. The appeal filed by the Revenue was dismissed. The Tribunal held that the assessee was entitled to the benefit of SSI exemption as per Notification No. 8/2003 CE dated 1.3.2003, and the charge of clandestine clearance of goods was not sustainable in the absence of corroborative evidence. The judgment was pronounced in the open court on 01.09.2017.

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