2018 (6) TMI 782 - AT - Central Excise

Clandestine removal - the entire case of the Revenue is based upon the sole factor that M/s. Vishal Packaging Industries could not establish that during the relevant period, they had entered into an agreement with either M/s. V K Enterprises and M/s. Tambi Powerloom Ltd. - Held that - This factor by itself cannot lead to conclusion that present appellant had cleared PET bottles in the guise of PET preform without payment of duty - It is well settled law that allegations and findings of clandestine removal are required to be made on the basis of positive evidence and cannot be upheld merely on doubts. There is virtually no evidence on record to show as to who were the transporters and buyers of clandestinely cleared bottles - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Clandestine removal of PET bottles by the appellant.
2. Lack of establishment of agreements with third-party units by M/s. Vishal Packaging Industries.
3. Allegations of duty evasion, interest, and penalties by the Revenue.

Analysis:
1. The case revolved around the alleged clandestine removal of PET bottles by the appellant. Central Excise officers found discrepancies during a visit to the factory, including shortages of granules and PET chips. The appellant accepted and paid the duty for these discrepancies. However, another issue arose regarding the sending of PET performs to job worker M/s. Vishal Packaging Industries. The officers discovered that M/s. Vishal Packaging Industries did not have the necessary machinery for manufacturing bottles in their factory during the inspection.

2. Further investigation revealed that M/s. Vishal Packaging Industries had previously rented premises and machinery from other units for bottle manufacturing. While agreements were in place for some periods, there was a lack of a rent agreement for a specific time frame. This led the Revenue to suspect that PET bottles, actually manufactured by the appellant, were being cleared as preforms by M/s. Vishal Packaging Industries. Consequently, proceedings were initiated against the appellant for alleged clandestine removal of PET bottles.

3. In the judgment, it was emphasized that the Revenue's case primarily relied on the absence of agreements between M/s. Vishal Packaging Industries and the third-party units during the relevant periods. However, the absence of such agreements alone was deemed insufficient to establish that the appellant had evaded duty by clearing PET bottles as preforms. The tribunal highlighted the need for positive evidence to support allegations of clandestine removal, stating that mere doubts were insufficient. The lack of evidence regarding transporters and buyers of the allegedly cleared bottles further weakened the Revenue's case. Consequently, the impugned orders were set aside, and both appeals were allowed on 1st June 2018.