2018 (3) TMI 612 - AT - Central Excise

Clandestine removal - shortage of stock - Held that - It is well settled that shortages by itself do not lead to the inevitable conclusion of clandestine removals - The Hon ble Allahabad High Court in the case of CCE Vs. Meenakshi Castings 2011 (8) TMI 896 - ALLAHABAD HIGH COURT has held that in the absence of any evidence of clandestine removal, adverse inferences of clandestine removal cannot be upheld on the basis of apparent shortage of stock. Inasmuch as the Revenue s case is solely based upon the shortages detected by the visiting officers, without there being any tangible evidence of clandestine removal - penalty upheld. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confiscation of goods found loaded in the truck without payment of duty
2. Confirmation of duty demand based on alleged clandestine removal
3. Imposition of penalties

Confiscation of Goods:
The case involved the confiscation of 1.515 MTs of MS square found loaded in a truck without payment of duty from the appellant's premises. The tribunal upheld the confiscation, stating that excisable goods can only be cleared from the manufacturer's factory upon payment of duty. The decision also included a fine of ?10,000 for redemption of the goods, considering the intention to evade duty.

Confirmation of Duty Demand:
Regarding the duty demand of ?10,31,592, the tribunal analyzed the findings of clandestine removal based on shortages detected by visiting officers. The appellant argued that the stock verification was not done properly and there was no other evidence to support the allegations. The tribunal noted that shortages alone do not prove clandestine removal, citing precedents like CCE Vs. Meenakshi Castings. As the Revenue's case relied solely on shortages without tangible evidence of clandestine removal, the tribunal set aside the confirmation of demand and penalties.

Imposition of Penalties:
The original adjudicating authority had imposed penalties along with the duty demand confirmation. However, since the tribunal found no substantial evidence of clandestine removal apart from shortages, it overturned the penalties. The tribunal emphasized the importance of tangible evidence in cases of alleged duty evasion and highlighted the need for proper stock verification procedures to establish clandestine removal conclusively.

In conclusion, the tribunal upheld the confiscation of goods due to evasion of duty but overturned the duty demand confirmation and penalties as there was insufficient evidence of clandestine removal. The decision emphasized the necessity of concrete evidence to establish duty evasion and highlighted the legal precedent that shortages alone are not conclusive proof of clandestine activities.