2017 (10) TMI 1119 - AT - Central Excise

Clandestine removal - Shortage of inputs and finished goods - substantiation of facts - Held that - Shri Sandeep Maheshwari, authorised officer of the appellant has only stated that he is unable to explain the reasons of shortage. Such statement, without further corroboration, cannot be accepted as evidence of clandestine removal of goods, without payment of Central Excise duty - further, the stock verification was conducted on average basis, without consideration of the actual weighment of goods. Thus, it cannot be said that the stock position arrived at is correct and proper. No iota of evidence was produced by the department to prove that the goods found short during verification were removed clandestinely from the factory without payment of Central Excise duty - reliance placed in the case of CHANDPUR ENTERPRISES LTD. Versus COMMR. OF C. EX. & SERVICE TAX, MEERUT-I 2014 (8) TMI 970 - CESTAT NEW DELHI , where it was held that demand cannot be sustained, without substantiation of the fact of clandestine removal of goods - allegation of clandestine removal cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged clandestine removal of goods without payment of Central Excise duty based on stock verification discrepancies.

Analysis:
The case involved an appeal against the order passed by the Commissioner (Appeals), Central Excise, Meerut, confirming a Central Excise duty demand and penalties imposed on the appellant company due to discrepancies found during stock verification of finished goods and inputs used in manufacturing CTD/TMT bars. The appellant argued that the stock verification was conducted on an average basis, and the method adopted by the Central Excise officers did not accurately reflect the actual stock position. The appellant contended that the charges of clandestine removal were not satisfactorily proven by the Department. The appellant relied on previous tribunal decisions to support the argument that the demand cannot be confirmed without proper substantiation of clandestine removal of goods.

Upon examination of the case records, the Member (Judicial) found that the authorized officer of the appellant was unable to explain the reasons for the shortage of goods. The Member noted that the stock verification was conducted on an average basis without considering the actual weighment of goods, leading to doubts about the accuracy of the stock position determined. It was observed that the Department failed to provide any evidence to prove that the goods found short during verification were removed clandestinely without payment of Central Excise duty. The Member emphasized the importance of corroborative evidence in establishing clandestine removal, including evidence of manufacture, clearance, transportation, or identification of buyers. Citing precedents, the Member concluded that in the absence of substantiation of clandestine removal, the demand cannot be sustained.

Ultimately, the Member set aside the impugned order and allowed the appeal in favor of the appellant, highlighting the lack of merit in the allegations of clandestine removal without sufficient corroborative evidence. The decision was pronounced in court on 9th October 2017.