2018 (2) TMI 1557 - AT - Central Excise

Clandestine manufacture and removal - shortage of raw material and finished goods - allegation on the basis of entries made in the records maintained by M/s. Amit Steels - whether charges of clandestine clearance can be upheld based upon the said unverified statement of Shri Narendra Agarwal? Held that - Admittedly his cross examination has not been done and the appellant has not been able to verify the correctness of the same. The name of the company as reflected in the records of M/s. Amit Steels was Shree Balaji Maharaj and not the present appellant. It is only the basis of said statement of Shri Narendra Agarwal that the Revenue has proceeded against the appellant. It is well settled law that allegation of clandestine removal are required to be discharged by the Revenue by producing sufficient positive and cogent evidence. There is nothing in the present impugned order of the lower authorities indicating any procurement of excess raw material conversion of the same into final product and clearance of the same without payment of duty. The statement of the transporter recorded by the officers has also not given any details of the clearances made from the assessee factory except to state in a wide manner that he was engaged in transportation of goods. No customers have been identified and there is no evidence of payment of any consideration for such clearances. Hon ble Allahabad High Court in the case of CCE vs Meenakshi Castings 2011 (8) TMI 896 - ALLAHABAD HIGH COURT has held that shortages of finished stock without evidence of clandestine removal could not lead to inference of evasion of duty and no penalty is imposable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Allegation of clandestine manufacture and removal of final products without duty payment, confirmation of duty demand, imposition of penalties, verification of statements, evidence of shortages leading to duty evasion, justification for penalties.

Allegation of Clandestine Manufacture and Removal:
The case involved M/s. B K Rolling Mills Pvt. Ltd. being accused of clandestine manufacture and removal of final products without duty payment based on statements and documents recovered from M/s. Amit Steels. The appellant contested the allegations, requesting cross-examination of a key witness, Shri Narendra Agarwal, whose statement was relied upon by the Revenue. However, Agarwal did not appear for cross-examination. The tribunal noted that the Revenue failed to produce sufficient, positive, and cogent evidence to support the allegations. The tribunal highlighted that entries in third-party documents cannot solely form the basis for charges of clandestine manufacture, especially when no excess raw material procurement or evidence of clearance without duty payment was presented. Consequently, the tribunal found no justification for penalties imposed on the appellant.

Verification of Statements and Evidence of Shortages:
The tribunal emphasized the importance of verifying statements and evidence in cases of alleged duty evasion. It noted that the appellant's inability to verify the statement of Shri Narendra Agarwal, coupled with the lack of concrete evidence linking the shortages to duty evasion, undermined the allegations of clandestine removal. Referring to a precedent, the tribunal highlighted that shortages alone, without evidence of clandestine removal, do not warrant duty evasion inferences or penalty imposition. Therefore, the tribunal set aside the confirmed duty demand and penalties, as there was no substantial evidence supporting the allegations.

Conclusion:
The appellate tribunal, in a judgment delivered by Ms. Archana Wadhwa, Member (Judicial), ruled in favor of M/s. B K Rolling Mills Pvt. Ltd., allowing all appeals and providing consequential relief. The tribunal rejected the allegations of clandestine manufacture and removal, emphasizing the lack of concrete evidence and the failure to verify key statements. Additionally, the tribunal dismissed the confirmed duty demand and penalties, highlighting the insufficiency of evidence linking shortages to duty evasion. The judgment underscored the necessity for the Revenue to present substantial and verified evidence to support allegations of duty evasion, ultimately leading to the decision in favor of the appellants.