2017 (11) TMI 873 - AT - Central Excise

Clandestine manufacture and removal - case of Revenue is that it is undisputed fact that the said hand written slips were found within the factory premises and therefore, they should be accepted as evidence of clandestine removal - Held that - Revenue did not carried any investigation in respect of procurement of raw-materials, manufacture of goods alleged to be clandestinely removed, transporters of the goods alleged to have been clandestinely removed and the purchasers of said goods - Revenue also did not investigate into flow back of money on clearance of alleged clandestinely manufactured goods. Clandestine manufacture of goods by M/s Deep Jyoti Rubber Pvt. Ltd. alleged in the said Show Cause Notice dated 06/11/2003 is not established - the value of clearance for both the years 2001-02 & 2002-03 was less than threshold limit of ₹ 1 Crore and therefore, the said Show Cause Notice 06/11/2003 does not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues: Allegations of clandestine removal and under-valuation leading to demand of Central Excise duty and imposition of penalties.

In this judgment by the Appellate Tribunal CESTAT ALLAHABAD, the appeals arose from a common Order-in-Appeal passed by the Commissioner of Central Excise & Customs, Meerut-II at Noida. The appellants were engaged in the manufacture of various products, and the Revenue suspected clandestine activities based on hand-written paper slips found during an inspection. The Revenue alleged that goods were clandestinely manufactured and cleared, leading to the calculation of duty for the Financial Years 2001-02 & 2002-03. The appellants contested the Show Cause Notice, arguing lack of credible evidence and challenging the allegations. The Original Authority confirmed the demand and imposed penalties on the appellants. The Commissioner (Appeals) upheld the Order-in-Original, prompting the appellants to appeal to the Tribunal.

The main contention raised by the appellants was that if the allegations of clandestine removal and under-valuation were not proven, the actual value of clearance for both financial years would fall below the SSI Exemption limit. They argued that the loose slips' author could not be established, and without corroborative evidence, the allegations did not hold, citing precedents. The appellants also highlighted that not all goods were sold through the related entity, refuting the under-valuation claims. The Revenue, however, insisted that the hand-written slips found within the factory premises should be considered as evidence of clandestine removal.

Upon review, the Tribunal found that the Revenue failed to investigate crucial aspects like procurement of raw materials, manufacturing process, transporters, and purchasers of the alleged clandestinely removed goods. Citing relevant case laws, the Tribunal concluded that the clandestine manufacture of goods was not proven, and the under-valuation allegation was unsubstantiated. As the value of clearance for both years was below the SSI Exemption threshold, the Show Cause Notice was deemed unsustainable. Consequently, the impugned Order-in-Appeal was set aside, and all appeals were allowed, entitling the appellants to consequential relief as per the law.