2017 (9) TMI 1482 - AT - Central Excise

Clandestine removal - shortage of stock - pig-iron - C.I. scrap - demand on the ground that the said inputs not used in or in relation to the manufacture of finished goods - Held that - the shortage of the goods was admitted and therefore, the demand of duty alongwith interest is justified. But there is no material of clandestine removal of goods and the penalty u/s 11 AC of the Act cannot be invoked - demand of duty alongwith interest is justified - penalty set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues: Alleged wrongful availment of Cenvat credit, shortage of inputs, penalty imposition

Analysis:
The case involved the appellants, engaged in the manufacture of Cast Iron and Castings, facing a Show Cause Notice alleging the wrongful availment and utilization of Cenvat credit without using inputs in the manufacture of finished goods. The Adjudicating Authority confirmed the demand and imposed penalties. The Commissioner (Appeals) upheld the Adjudication order.

Upon hearing both sides and reviewing the records, it was found that a computerized statement recovered during a search showed a discrepancy in raw material stock, leading to the demand for Cenvat credit. The appellant admitted a shortage of inputs, attributing it to the inferior quality of the inputs causing excess burning. The appellant cited legal precedents to argue that mere shortage does not imply clandestine removal without evidence, which was detected during physical verification.

In contrast, the Respondent relied on a case involving clandestine removal of goods found in private records and a smuggling case, arguing for the justification of duty demand due to admitted shortages. However, the absence of evidence for clandestine removal led to the setting aside of the penalty under Section 11 AC. Consequently, the demand for duty and interest was upheld, while the penalty was revoked. The appeal was disposed of accordingly.

This judgment highlights the importance of evidence in establishing clandestine removal of goods and the distinction between shortages due to legitimate reasons and wrongful activities. The decision emphasizes the need for concrete proof to impose penalties under relevant sections of the Act, ensuring a fair and just adjudication process.