2018 (3) TMI 1237 - AT - Central Excise

Clandestine removal - SSI exemption - crossing of threshold exemption limit - Held that - when department has established that appellant is engaged in the activity of clandestine removal of goods, the burdencast on the appellant to prove that they were not engaged in the activity of clandestine removal of goods and they have to brought on record supportive evidence like certificate from the principal manufacturer or certificate from the buyer who has returned the goods. The appellant has failed to prove with documentary evidence that the demand is not sustainable on account of clandestine removal of goods - demand upheld. Considering the fact that the main appellant has paid duty along with interest and 25% penalty, therefore, penalty on the main appellant is restricted to 25% of the duty demand - Further, penalty on the Director is on higher side, therefore, penalty on the Director, namely Shri Pawan Goyal reduced to ₹ 40,000/-. Appeal allowed in part.

Summary

Issues: Appeal against duty demand, penalty imposition, clandestine clearance of goods, cancellation of challans, job worked goods, goods returned, burden of proof.

Analysis:
1. Duty Demand and Penalty Imposition: The appellants contested an order demanding duty of ?3,17,156 along with interest and imposing penalties. The visit to their factory revealed loose slips for goods clearance, leading to allegations of clandestine clearance post-exhausting SSI exemption. While some demands were dropped after explanations, others were upheld with penalties. The appellants challenged this order.

2. Clandestine Clearance Allegations: The appellants argued they cleared goods based on loose slips before issuing invoices. They contended that demands related to cancelled challans, job worked goods, and returned goods were unjust as the adjudicating authority failed to appreciate supporting documents.

3. Burden of Proof: The tribunal noted that the appellants indeed cleared goods using loose slips, shifting the burden to prove the legitimacy of cancelled challans, job work, and returned goods. The appellants failed to provide evidence such as certificates from manufacturers or buyers to refute the clandestine clearance allegations.

4. Decision: The tribunal upheld the demand, citing the appellants' failure to substantiate their claims with documentary evidence. The duty demand was confirmed along with interest. However, considering duty payment and penalties by the main appellant, the penalty was restricted to 25% of the duty demand. The penalty on the Director was reduced to ?40,000 due to being deemed excessive.

5. Conclusion: The appeals were disposed of with the tribunal finding no infirmity in the impugned order due to lack of evidence disproving clandestine clearance. The decision highlights the importance of providing substantial documentary proof to counter allegations in such cases.