2018 (7) TMI 249 - AT - Central Excise

Clandestine removal - allegation based on one monthly report prepared by the staff of the appellant company and marked as Monthly Production Report of Hyde Road Dryer Plant - principles of Natural Justice - Held that - The entire case has been made on the basis of appellant s private documents and the same are not supported by any corroborative evidence. The allegation of clandestine clearance based on the private documents and not supported by corroborative evidences cannot be sustained - In the present proceedings there is no indication of excess raw-materials and extra consumption of electricity. There is no seizure of clandestinely removed finished goods or seizure of any cash of clandestine transaction involved in such suspected clandestine clearance. A private document without any corroborative evidence brought on record cannot be made the basis of clandestine manufacture and clearances of excisable goods - appeal allowed - decided in favor of appellant.

Summary

Issues: Allegation of clandestine clearance based on private documents without corroborative evidence, violation of principles of natural justice in issuing show cause notice, discrepancy in audit procedures

In this case, the appellant, engaged in the manufacture of Resin Powder and Hardener, was issued a Show Cause Notice for the recovery of central excise duty, interest, and penalty based on a differential quantity calculated during an audit. The appellant challenged the notice, arguing that the Adjudicating Authority did not consider the points raised in their reply and at the personal hearing, proceeding arbitrarily without proper basis or evidence. The appellant contended that the monthly reports in question were internal documents for management appraisal, not suitable for alleging clandestine clearance. The Tribunal noted that the allegation of clandestine clearance was solely based on one such monthly report, which was not provided to the appellant as required by law, denying them natural justice. The audit procedures were also found to be flawed, as the document relied upon was not declared under the Central Excise Rules, and no spot memo was issued to clarify discrepancies. The report in question was a combined report of two related companies, and a reconciliation statement showed no discrepancies when their reports were combined. The Tribunal emphasized that allegations of clandestine clearance must be supported by corroborative evidence, which was lacking in this case. The absence of seized goods or cash further weakened the Revenue's case.

The Tribunal ruled that a private document without corroborative evidence cannot be the sole basis for alleging clandestine manufacture and clearances of excisable goods. Therefore, the duty demanded by the Revenue was deemed unsustainable. The appeal filed by the appellant was allowed, granting them consequential relief. The judgment highlighted the importance of following proper audit procedures, providing necessary documents to the appellant, and ensuring that allegations are supported by concrete evidence to uphold principles of natural justice and fairness in excise duty matters.