2018 (4) TMI 363 - AT - Central Excise

Clandestine removal - the transporter has transported number of consignments of the appellant for which no sales invoices were issued - case of appellant is that the same is solely based upon the records of the transporters without there being any corroborative evidence - Held that - there are number of decisions laying down that the findings of clandestine removal cannot be upheld on the basis of the documents recovered from third party premises - reliance placed in the case of Raipur Forging Pvt. Ltd. 2016 (2) TMI 763 - CESTAT NEW DELHI . Apart from the shortages, there is virtually no other evidence on record to reflect upon the clandestine activities of the appellant. As per the settled law such shortages, by themselves, cannot lead to the fact of clandestine removals so as to justify confirmation of demands. The entire case of the Revenue is based upon the shortages detected at the time of visit of the officers, without there being any other evidence, there is no reason to uphold the same. Demand of ₹ 73,179/- based upon the photocopies of two invoices - Held that - The names of the buyers were available with the Revenue but neither any investigation was conducted at their end or at the end of the raw materials supplier - inculpatory statement by itself is not sufficient without the matters having been further investigated - demand set aside. Demand of ₹ 61,199/- in respect of service tax payable by the appellant on the GTA services, so received by them - Held that - the service tax paid by the appellant on reverse charge basis, in respect of GTA services was availed to them as credit, thus leading to revenue neutral situation - demand not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Demand based on transporter documents, Alleged shortages of raw materials and finished goods, Demand based on photocopies of invoices, Demand based on diary entry, Service tax liability on GTA services.

Analysis:
1. Demand based on transporter documents: The appellant, engaged in manufacturing Ferro Vanadium and Ferro Molybdenum, faced a demand of ?37,60,496 based on documents from a transporter showing consignments without sales invoices. The appellant contested this demand citing lack of corroborative evidence, referencing a High Court decision emphasizing the need for tangible evidence in cases of clandestine removal. The tribunal noted precedents that findings of clandestine removal cannot solely rely on third-party documents. Consequently, the demand and penalty were set aside.

2. Alleged shortages of raw materials and finished goods: A demand of ?2,78,700 was confirmed for shortages detected during a visit, which the appellant argued were based on eye estimation and insignificant considering the overall stock. Citing legal decisions, the tribunal emphasized that shortages alone do not prove clandestine removals. Rulings from various High Courts and Tribunals were referenced to support the appellant's argument. As the demand was solely based on shortages without additional evidence, it was set aside.

3. Demand based on photocopies of invoices and diary entry: Demands of ?73,179 and ?38,934 were confirmed based on photocopies of invoices and a diary entry, respectively. The tribunal noted a lack of further investigation by the Revenue despite exculpatory statements from the appellant's director. Legal precedents highlighted the necessity of positive evidence for upholding clandestine removal demands. As no substantial evidence was presented beyond the entries, the demands were set aside.

4. Service tax liability on GTA services: A demand of ?61,199 for service tax on GTA services was confirmed, with the appellant claiming the tax was creditable and the extended period invoked being barred by limitation. The tribunal acknowledged the revenue-neutral situation due to the tax credit availed by the appellant, following a precedent that extended periods cannot apply in such cases. Consequently, the demand against the appellant was deemed unsustainable and set aside.

In conclusion, the tribunal set aside all demands and penalties, providing consequential relief to the appellant based on the lack of substantial evidence and legal precedents emphasizing the need for tangible proof in cases of alleged clandestine activities and service tax liabilities.