2017 (12) TMI 1431 - AT - Central Excise

Clandestine removal - entire case of the Revenue is based upon the shortages of coloured tobacco detected at the time of their visit in the appellants factory - Held that - It was not possible to convert 630 kgs coloured tobacco into marketable final product i.e. branded chewing tobacco and remove it within one day. It is settled law that he who asserts must prove his assertion by producing cogent evidence and/or producing witness. No evidence has been adduced to prove allegation of clandestine removal, therefore, even otherwise, the demand of duty and imposition of penalty are not justified. Apart from the shortages, there is virtually no evidence on record to show the clandestine activities of the appellants - In the absence of any identification of the buyers, transporters, receipt of consideration etc., the findings of the clandestine activities cannot be upheld. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of duty demand and penalty against the appellant, imposition of penalties on partners, appeal against Order-in-Original confirming demand and penalties, lack of evidence for clandestine removal, double payment of duty on the same goods, absence of proof for clandestine activities, reliance on previous judgments, entitlement to refund of collected amounts, insufficiency of evidence for charges, dismissal of claim as an afterthought, failure to consider the manufacturing process, reliance on assumptions and presumptions by the Revenue.

Analysis:
The judgment revolves around three appeals arising from an impugned order confirming a duty demand of approximately &8377; 4.43 lakhs against M/s Kesarewani Zarda Bhandar, along with penalties. The officers found a shortage of 630 kgs of coloured tobacco, leading to the duty demand and penalties. The appellants contended that the shortage was due to the tobacco being cleared for drying, not for clandestine removal. The Assistant Commissioner confirmed the demand and penalties, which was upheld by the Commissioner (Appeals).

Upon appeal, the Judicial Member analyzed the case, emphasizing the need for the Revenue to prove the allegation of clandestine removal with evidence. The appellants argued that they would have to pay duty twice on the same goods if the shortage was not considered. The Member highlighted the lack of evidence supporting clandestine activities and cited previous judgments to support the appellants' position.

The Member noted the absence of substantial evidence to prove clandestine activities and the Revenue's reliance on assumptions and presumptions. Referring to the manufacturing process requiring drying of coloured tobacco, the Member found the Revenue's conclusions based on surmises and conjectures. The Member concluded that the impugned order lacked justification, set it aside, and allowed all appeals with consequential relief to the appellants.

In summary, the judgment addresses issues related to duty demand, penalties, lack of evidence for clandestine removal, double payment of duty, reliance on previous judgments, entitlement to refund, insufficiency of evidence for charges, and the Revenue's reliance on assumptions. The decision emphasizes the importance of proving allegations with concrete evidence and highlights the need for a thorough examination of facts before confirming penalties or demands.