2018 (1) TMI 824 - AT - Central Excise

Clandestine removal - shortage of stock - burden of prove - Held that - case of clandestine removal without payment has to be established with supporting evidence, the goods which are recorded, as produced/in stock, are not available in the approved premises of the appellant. In such situation, necessarily the burden shifts to the appellant to explain such shortage satisfactorily - In the present case, the appellant failed to do so - it is not a case of clandestine clearance of unaccounted production. It is a case of unaccounted clearance of accounted production. The appellant has responsibility to explain the unaccounted shortage - appeal dismissed - decided against appellant.

Summary

Issues:
1. Alleged unaccounted clearance without payment of duty
2. Shortage of excisable items found during verification
3. Liability to pay excise duty and penalty under Section 11AC of the Central Excise Act, 1944
4. Contestation of shortage as evidence of clandestine removal
5. Contestation of penalty imposition and demand on limitation grounds
6. Nature of mill scale as a manufactured item or waste product

Analysis:
1. The appeal challenged an order by the Commissioner (Appeals) regarding alleged unaccounted clearances without payment of duty. The officers found a shortage of excisable items during a verification at the appellant's factory, leading to the initiation of proceedings to demand unpaid excise duty amounting to ?20,01,193. The original authority ordered the appropriation of the amount already paid by the appellant and imposed a penalty under Section 11AC of the Central Excise Act, 1944, equal to the duty amount. The Tribunal confirmed this order.

2. The appellant argued that the case was solely based on the shortage of items found during verification and contested the methodology used, claiming the shortage was negligible and not evidence of clandestine removal. They also disputed the demand on limitation grounds and contended that the penalty was unjustified as there was no malice involved in the shortage.

3. The Revenue supported the lower authorities, stating that the shortage was based on the appellant's records and physical stock verification. They argued that the burden was on the appellant to explain the substantial shortage satisfactorily, which the appellant failed to do. The Revenue contended that the shortage indicated unaccounted clearances of accounted production, shifting the responsibility to the appellant to explain.

4. The Tribunal noted that the appellant's authorized representative had admitted the shortage during stock taking, which held evidentiary value. Despite the appellant's insistence on the Revenue proving clandestine removal, the Tribunal found the burden shifted to the appellant due to unexplained shortages. The appellant's failure to provide a satisfactory explanation led to the dismissal of their appeal.

5. The Tribunal upheld the lower authorities' findings, noting the appellant's failure to discharge their burden of explaining the shortage. The appellant's payment of the full duty liability the day after detection was acknowledged. Additionally, the argument regarding mill scale not being a manufactured item was raised belatedly without sufficient supporting evidence, leading the Tribunal to dismiss the appeal.

This detailed analysis covers the issues raised in the judgment comprehensively, highlighting the arguments presented by both parties and the Tribunal's reasoning for dismissing the appeal.