2017 (12) TMI 228 - AT - Central Excise

Clandestine removal - shortages of inputs - Held that the Show Cause Notice has not established that the alleged quantity of clandestinely cleared goods valued at ₹ 4.25 Crores was in addition to the clearance of goods valued ₹ 43,84,58,438.26/- as reflected in the record - Further value of alleged clandestinely cleared goods was based on such records of third party which are not covered by any accounting standards. Revenue did not ascertain the value of clearance from the statutory record and the information in the books of account maintained by the M/s Surya in the normal course of business to establish that the statutory records and books of account are not reliable. In respect of inputs found short, no evidence has been produced to establish that they were used in the manufacture of goods clandestinely manufactured goods and its clandestine clearance. The present SCN is presumptive in nature - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Central Excise duty evasion through a sales promotion scheme.
2. Imposition of penalties on the manufacturer and co-noticees.
3. Authentication of sales figures and card summary sheets.
4. Denial of natural justice in cross-examination of witnesses.
5. Allegations of clandestine removal and lack of evidence.
6. Comparison of information in card summary sheets with statutory records.
7. Legal principles regarding presumptive nature of Show Cause Notice.

Analysis:
1. The case involved appeals against an Order-in-Original passed by the Commissioner of Central Excise, Noida, related to Central Excise duty evasion through a sales promotion scheme called Swarn Jayanti Dhamaka by M/s Surya Food & Agro Ltd. and other co-noticees. The scheme involved distributing gifts to retailers based on sales targets, leading to alleged evasion of duty amounting to ?60,60,087. The Original Authority confirmed the demand, imposed penalties under Section 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 2001/02 on the appellants.

2. The grounds of appeal raised issues regarding the authentication of sales figures maintained by retailers in card summary sheets, violation of legal principles, assumptions in the Show Cause Notice, denial of cross-examination of witnesses, and lack of evidence for clandestine removal. The appellants argued that the information in card summary sheets was not compared with statutory records, and the Show Cause Notice was not sustainable due to discrepancies in clearances reflected in records.

3. The Tribunal analyzed the contentions and found that the Show Cause Notice failed to establish that the alleged clandestinely cleared goods were in addition to the goods reflected in statutory records. The value of cleared goods was based on third-party records not covered by accounting standards, and Revenue did not ascertain the value from statutory records. Citing a previous judgment, the Tribunal emphasized the importance of authentic statutory records over third-party figures, leading to the setting aside of the impugned Order-in-Original and allowing all appeals.

4. In conclusion, the Tribunal held the Show Cause Notice to be presumptive in nature, lacking substantial evidence to support the allegations of duty evasion. The appellants were granted consequential relief as per law, and the impugned Order-in-Original dated 31/01/2006 was set aside. The decision highlighted the necessity of establishing discrepancies between statutory records and third-party information to prove duty evasion conclusively.