2018 (1) TMI 99 - AT - Central Excise

Clandestine removal - manufacture of biscuits - Held that - occurrence of rejects and/or process loss is a normal feature in the biscuit industry - appellant had given proper intimation to the Revenue Authority of the proposed destruction and the same was destroyed after about two weeks from the date of such intimation - there is no evidence on record of any clandestine activity and/or attempted removal on the part of the appellant. The whole show cause notice is presumptive - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of clandestine removal of goods by the appellant.

Analysis:
The issue in this appeal revolves around whether the appellant engaged in clandestine removal of goods, particularly biscuits. The appellant, a registered manufacturer of biscuits, submitted an application to the Revenue informing them about the destruction of certain batches of biscuits not fit for human consumption. The Revenue alleged that the biscuits were clandestinely removed, valuing them at a significant amount and imposing duty on the same. The appellant was also accused of not following proper procedures and amending records related to the destruction of the goods. The Assistant Commissioner confirmed the demand and penalty proposed in the show cause notice in the Order-in-Original dated 30th May, 2008.

The appellant, however, contended that the rejected biscuits were a common occurrence in the industry and were disposed of as per the contract terms with Parle Biscuits Pvt. Ltd. They argued that proper intimation was given to the Revenue before the destruction of the goods, and the representative of Parle Biscuits Private Ltd. was present during the disposal. The appellant highlighted that the defective biscuits were not marketable and were destroyed due to being unsuitable for consumption. They reversed the Cenvat credit involved in the waste quantity and provided explanations for the discrepancies in the records pointed out by the Revenue.

In the final judgment, the Tribunal observed that rejects and process losses were normal in the biscuit industry. It noted that the appellant had informed the Revenue in advance about the destruction of the goods and found no evidence of clandestine activity or attempted removal by the appellant. The Tribunal deemed the show cause notice presumptive and not maintainable, ultimately allowing the appeal and setting aside the impugned order. The appellant was granted consequential benefits as per the law.

This case highlights the importance of proper documentation, adherence to contract terms, and providing timely intimation to regulatory authorities when dealing with rejected goods in the manufacturing industry. It also emphasizes the need for concrete evidence to support allegations of clandestine activities to maintain the validity of show cause notices and subsequent penalties.