2017 (11) TMI 755 - AT - Central Excise

Clandestine removal - shortage of 2420 pieces of water closet - Irregular availment of Cenvat credit - clandestine removal of 6847 pieces of finished goods - Held that - with regard to water closet, the objections raised by the appellant with reference to the procedure adopted is nothing but an afterthought. During the statements recorded from various connected employees of the appellant company, no one could give any explanation regarding the shortage of goods found - demand upheld. Irregular availment of cenvat credit on input services - Held that - the transfer of credit from head office to the appellant unit cannot be held as irregular only for the reason that the head office has failed to take out registration aside. However before such credits are permitted, it will be necessary for the appellant to satisfy the Departmental authorities about the nature of services for which service tax has been paid so that the Department can verify whether such services fall within the definition of input service under rule2(l) of the Cenvat Credit Rules 2004 - matter placed on remand. Suppression of production and clandestine removal of 6847 pieces of finished goods - Held that - After careful consideration of the invoices submitted by the appellant, it is concluded that these do not pertain to the goods and hence demand has been raised in the show cause notice - demand upheld. Part matter on remand and partly decided against appellant.

Summary

Issues:
1. Alleged clandestine removal of water closets
2. Irregular availment of Cenvat credit
3. Suppression of production and clandestine removal of finished goods

Alleged Clandestine Removal of Water Closets:
The appellant, engaged in manufacturing sanitary wares, challenged the duty demand of ?20,07,789 for the alleged removal of 2420 water closets. They argued that the stocktaking was based on eye estimation and not feasible in half a day. However, the Tribunal found that the procedure was known to the company's representative present during stocktaking. No satisfactory explanation for the shortage was provided by the company's employees. The Tribunal upheld the duty demand as the objections raised were deemed as an afterthought.

Irregular Availment of Cenvat Credit:
Regarding the irregular availment of Cenvat credit amounting to ?22,70,294, the appellant's failure to register the head office as an Input Service Distributor (ISD) was highlighted. The Tribunal noted that the transfer of credit from the head office to the manufacturing unit was not irregular solely due to the lack of ISD registration. However, the appellant was directed to provide relevant invoices for scrutiny to verify the eligibility of services claimed for Cenvat credit. The issue was remanded to the adjudicating authority for a fresh decision.

Suppression of Production and Clandestine Removal of Finished Goods:
The allegation of suppressing production and clandestine removal of 6847 finished goods was also contested. The goods categorized as 'S' were not accounted for in the stock register and were allegedly cleared without payment of duty. The appellant claimed that some goods were cleared with duty payment and the rest exported under rebate. Despite the appellant's defense, the Tribunal upheld the duty demand of ?21,91,520 as the invoices submitted did not align with the claimed goods. The demands related to clandestine clearance were upheld, while the issue of inadmissible Cenvat credit was remanded for further review.

This judgment addressed the issues of alleged clandestine removal of specific goods, irregular Cenvat credit availment, and suppression of production and removal of finished goods. The Tribunal carefully analyzed each issue, considering evidence, procedural lapses, and legal justifications presented by both parties. The decision upheld duty demands on clandestine removal and suppression of goods while remanding the Cenvat credit issue for a fresh decision based on additional document scrutiny and verification of service eligibility.