2018 (6) TMI 781 - AT - Central Excise

Clandestine removal - goods found short - Revenue entertained a view that such short found goods have been cleared by them without payment of duty - Held that - There is no inventory issued by the officers for the purpose of stock taking of goods. Admittedly, such huge stock lying in the factory cannot be weighed and the fact of shortage or excess cannot be arrived at unless the inventories are prepared. There is no explanation of the Revenue as to how such huge stock was weighed. Further, the fact that the appellant had also sent their semi finished product to their job worker has a bearing on merits of the case. Hon ble Allahabad High Court in the case of CCE vs. Meenakshi Casting 2011 (8) TMI 896 - ALLAHABAD HIGH COURT has held that shortages held at the time of stock taking cannot lead to the inevitable conclusion of clandestine removal of the final product in the absence of any corroboratory evidence - Admittedly, in the present case, Revenue has not produced any evidence to establish clandestine activity of the assessee. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of clandestine removal based on shortages detected during stock taking.
2. Admissibility of statement by Senior Production Manager as evidence.
3. Reliance on previous court decisions regarding shortages and confessional statements.
4. Lack of corroborative evidence for clandestine removal.
5. Impact of sending semi-finished products to job worker on the case.

Analysis:
1. The case revolved around the allegation of clandestine removal by the Revenue based on shortages found during stock taking at the factory of the appellants. The Revenue initiated proceedings for duty confirmation and penalty imposition, leading to the current appeal.

2. The statement of the Senior Production Manager, admitting to shortages but unable to provide a reason, was a key piece of evidence for the Revenue. However, the appellants argued during adjudication that the stock taking process was flawed as it did not account for running stock and goods sent to a job worker, M/s. Jyoti Copper Dewas. They also contended that the statement did not explicitly confess to goods being cleared without duty payment.

3. The appellants relied on precedents from various High Courts, emphasizing that mere shortages and statements do not conclusively prove clandestine removal. The Commissioner (Appeals) acknowledged this but still considered the statement of the Senior Production Manager as significant due to his presence during stock taking.

4. The Tribunal noted the absence of corroborative evidence from the Revenue to establish clandestine activity. The lack of issued inventories for stock taking, the inability to weigh the huge stock, and the presence of semi-finished products sent for job work all raised doubts about the accuracy of the allegations.

5. Citing a judgment by the Allahabad High Court, the Tribunal emphasized that shortages during stock taking do not automatically indicate clandestine removal without additional evidence. Since the Revenue failed to provide such evidence, the impugned order was set aside, and the appeal was allowed.