2017 (10) TMI 735 - AT - Central Excise

Clandestine removal - Shortage of Finished Goods - 317.625 MTs of sponge iron - whether there was a clandestine removal of 317.625 MTs of sponge iron which was found short during the visit and stock verification in the appellant s factory or otherwise? - Held that - there is nothing on record to show that the appellant had received unaccounted money or appellant had received unaccounted raw materials, appellant has consumed unaccounted electricity or any other document to show that the goods were cleared clandestinely from the factory premises - the adjudicating authority was correct in dismissing the allegation made in the SCN that there was clandestine removal of the differential quantum of sponge iron - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Alleged shortage of finished goods leading to a demand for duty payment, sustainability of show-cause notice, clandestine removal of goods, evidence presented by both parties, correctness of lower authorities' decisions.

Analysis:
1. Shortage of Finished Goods: The case revolves around the alleged shortage of 317.625 MTs of sponge iron noticed during a visit by the Preventive Unit to the appellant's factory. The discrepancy was identified when comparing the physical stock with the RG1 stock. The lower authorities issued a show-cause notice demanding duty payment on the shortfall. The appellant contested the notice, leading to conflicting decisions by the adjudicating authority and the first appellate authority.

2. Sustainability of Show-Cause Notice: The appellant argued that the show-cause notice was unsustainable as the Revenue failed to provide evidence of clandestine removal of goods. The appellant presented records showing clearance of the disputed quantity of sponge iron under various invoices, supported by the RG1 register. The adjudicating authority initially dropped the proceedings, but the first appellate authority reversed this decision, upholding the demand for duty payment along with penalties.

3. Clandestine Removal of Goods: The key issue was whether there was indeed a clandestine removal of sponge iron from the factory premises. The appellant contended that the stock was cleared on payment of duty, as evidenced by the RG1 register entries. The Revenue, however, argued that the shortage was admitted by the appellant's officer, indicating removal without duty payment. The Tribunal analyzed the evidence, focusing on the lack of concrete proof of clandestine removal.

4. Evidence and Decision: Upon reviewing the submissions and records, the Tribunal found that the Revenue authorities' actions were inconsistent, as they did not direct the creation of a new RG1 register with the adjusted opening balance. The Tribunal noted that the appellant's claim of clearing the disputed quantity on duty payment was supported by the RG1 entries, which were not contested by the Revenue. Ultimately, the Tribunal agreed with the adjudicating authority's decision to dismiss the allegation of clandestine removal due to insufficient corroborative evidence and lack of tangible proof.

5. Conclusion: Considering the lack of concrete evidence supporting clandestine removal and inconsistencies in the Revenue's actions, the Tribunal concluded that the impugned order was unsustainable. Consequently, the Tribunal set aside the decision of the first appellate authority, allowing the appeal in favor of the appellant.