2018 (4) TMI 894 - AT - Central Excise

Clandestine removal - MS ingots - entire production was not reflected in the records - shortages of raw material - Held that - It is well established that onus to prove clandestine removal is upon Revenue and same is required to be discharged by production of positive, corroborative and cogent evidence and cannot be made on the basis of assumption and presumption - Revenue has not recorded the statements of any production incharge of the company or any other employee of the Company relatable to production of goods or clearance of the goods. No statement of transporter or any of the customer is available on record - demand of duty set aside. Shortages of various raw materials found in the premises - Held that - such shortages cannot lead to any conclusion of their clearance so as to ask for reversal of CENVAT credit - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine removal of goods, denial of cenvat credit on shortages of raw materials, imposition of penalties.

Alleged Clandestine Removal of Goods:
The appellant, engaged in manufacturing MS ingots, was accused of clandestinely clearing goods without proper documentation, leading to a duty demand of approximately ?14,26,583. The Revenue based its case on production slips and electricity consumption records. However, the tribunal found the production slips lacked crucial details like customer information and authorized signatures, rendering them insufficient evidence for clandestine removal. Additionally, the tribunal cited precedents where electricity consumption alone could not establish excess production. The onus to prove clandestine removal lies with the Revenue, requiring concrete evidence, which was found lacking in this case. The absence of statements from production staff, transporters, or customers further weakened the Revenue's case, leading to the dismissal of duty demands based on clandestine removal charges.

Denial of Cenvat Credit on Shortages of Raw Materials:
The Revenue also sought to deny cenvat credit on shortages of raw materials found in the appellant's premises. However, the tribunal highlighted established legal principles that shortages alone do not indicate clearance of materials, thus rejecting the basis for reversing cenvat credit. The tribunal referenced a decision by the Hon'ble Allahabad High Court and various tribunal rulings to support this stance, emphasizing that shortages do not automatically imply unauthorized clearance of materials, thereby disallowing the denial of cenvat credit in this case.

Imposition of Penalties:
The adjudicating authority had imposed substantial penalties under relevant sections of the Central Excise Act and Cenvat Credit Rules. Despite the Commissioner (Appeals) upholding these penalties, the tribunal, after considering submissions and reviewing the impugned order, found no merit in the Revenue's case. With insufficient evidence to establish clandestine removal or justify denial of cenvat credit, the tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The judgment underscores the necessity of concrete, corroborative evidence to support duty demands and emphasizes the importance of following established legal precedents in tax matters.

Conclusion:
The tribunal's detailed analysis and reliance on legal precedents highlight the critical role of evidence in tax disputes. By emphasizing the need for concrete proof and adherence to established legal principles, the judgment provides clarity on the burden of proof in cases involving alleged clandestine removal and denial of tax credits. The decision to set aside the duty demands and penalties underscores the importance of a robust legal framework and adherence to due process in resolving tax disputes.