2018 (1) TMI 102 - AT - Central Excise

Clandestine removal - shortage of M.S. Ingots - the demand has been confirmed by the appellate authority on the sole ground that the same has already been deposited by the appellants and appropriated - Held that - The deposit of the duty at the time of visit of the officer, when subsequently challenged by them, cannot be ground for confirmation of the same. The appellate authority after observing in favor of assessee on the issue of clandestine manufacture and removal, should have set aside the demand also - appeal allowed.

Summary

Issues: Clandestine removal, Shortage in stock verification, Penalty under Section 11AC, Confirmation of demand.

Clandestine Removal: The case involved a manufacturing unit visited by Central Excise Officers, where a shortage of 314 M.T. of M.S. Ingots was found during stock verification. The appellant reversed the credit availed for the shortage but could not provide valid documents. The show-cause notice alleged clandestine removal, leading to a demand confirmation and penalty imposition. The Commissioner (Appeals) noted that shortages alone do not prove clandestine removal without corroborative evidence. Lack of concrete evidence like mode of transport or statements from involved parties led to the penalty being deemed unsustainable.

Shortage in Stock Verification: The appellate authority confirmed the demand based on the shortage detected during the officers' visit. The appellant disputed the shortage calculation method, arguing for an actual weight system over an average weight system. The verification process involved weighing 20 M.S. Ingots to determine average weight, followed by actual counting and comparison with book balance, resulting in the identified shortage. The systematic weighment process was detailed to support the shortage findings.

Penalty under Section 11AC: The Commissioner (Appeals) set aside the penalty, emphasizing the need for concrete evidence to prove clandestine activities. Despite acknowledging a lack of evidence, the demand was confirmed, raising concerns over the basis for confirmation. The appellate authority's decision to confirm the demand solely because it was deposited earlier was deemed unjustifiable. The deposit of duty during the officer's visit could not serve as grounds for demand confirmation, especially when the allegations of clandestine removal lacked substantial evidence.

Confirmation of Demand: The contradictory nature of the appellate authority's order was highlighted, where the penalty was set aside due to insufficient evidence of clandestine removal, yet the demand was still confirmed. The confirmation based on prior deposit was deemed inadequate, and the demand was ultimately set aside, allowing the appeal. The judgment emphasized the importance of concrete evidence and proper justification for confirming demands in cases of alleged clandestine activities.