2018 (8) TMI 613 - AT - Central Excise

Clandestine manufacture and removal - shortage of MS Ingots and inputs - stock taking based on eye-estimation - Held that - Admittedly the stock of finished goods was also verified on eye-estimation basis inasmuch as there are neither any inventories nor any weighment slips produced by the Revenue to show that the said stock was actually weighed. The MS ingots being heavy material required weighment by a weigh-bridge and there is nothing to suggest about the method adopted by the officers for the weighment of the ingots in question - it is difficult to understand as to why two different and contra conclusions stand drawn by the appellate authority in respect of raw material and finished products. Apart from the alleged shortages, even if considered to be correct reflection of facts, there is no other evidence on record to corroborate the charges of clandestine removal and clearance of the final product - It is well-settled law that such charges are required to be established by production of positive and tangible evidence and the onus to discharge the same lies heavily on the Revenue. No further investigations stand made by the Revenue to corroboroate the said allegations, in the absence of which the findings arrived at by the lower authorities cannot be upheld. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Confirmation of duty on alleged clandestine manufacture and removal of final product.
2. Confirmation of demand on shortages of raw materials.
3. Imposition of penalties on the manufacturing unit and the Director.

Analysis:
1. The appellant, engaged in manufacturing MS ingots, faced proceedings due to shortages in finished goods and raw materials. The appellant accepted the shortages, leading to a show cause notice proposing duty confirmation and penalties. The original order confirmed demands and imposed penalties, which were partially set aside by the Commissioner(Appeals). The appellant appealed against the remaining demands, while the Revenue appealed against the set asides and penalties.

2. The Commissioner(Appeals) set aside the confirmation of demand for shortages of raw materials, citing the lack of evidence for clandestine removal. The weighment of raw materials was done on an eye estimation basis, not actual, as highlighted in various Tribunal decisions. The appellate authority found no evidence of clandestine removal and set aside the demand related to raw material shortages. The Revenue's appeal against this decision was rejected due to the lack of rebuttal evidence.

3. The demand on shortages of finished goods was confirmed, but the appellate authority's reasoning lacked consistency. While raw material shortages were set aside due to lack of evidence, the same standard was not applied to finished goods. The absence of weighment slips or inventories for the finished goods raised doubts. The charges of clandestine removal required tangible evidence, which was not provided by the Revenue. Citing High Court judgments, the appellate tribunal set aside the allegations of clandestine removal and confirmed demand, providing relief to the appellant.

4. Ultimately, the appellant's appeal was allowed, setting aside the demand and penalties. Consequently, the Revenue's appeal against penalty imposition became infructuous and was rejected. The cross-objections were also disposed of in favor of the appellant. The judgment was pronounced on 10.08.2018, with the appellant's appeal allowed, and both appeals of the Revenue rejected.