2018 (9) TMI 984 - AT - Central Excise

Clandestine removal - Shortage of Sponge Iron and MS Scrap - Held that - The entire case of the Revenue is based upon the shortages detected at the time of their visit. It is well settled law that the finding of clandestine removal cannot be upheld on the basis of the shortages detected during the course of visit of officers. Duty to the extent of ₹ 58,203/- and ₹ 4,19,035/- stands confirmed in respect of M.S. Ingots, Runners/Risers respectively based upon the shortages in the stock of the finished products - Held that - The said confirmation of demand which is solely based upon the shortages, without there being any independent evidences, do not sustain and is set aside. Demand of ₹ 3,32,731/- stands confirmed on the ground that the appellants have removed 102.950 MT of MS Ingots twice by using the same sale invoices - Held that - There is no evidence as to whom the said goods were sold for the second time. The said fact cannot be held to be a sufficient evidence to uphold the charges of clandestine removal - demand set aside. Penalties also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine removal, confirmation of demand, imposition of penalty

In this case, the appellant, engaged in manufacturing M.S. Ingots and Runner and Riser, availed Cenvat Credit of duty for various inputs. Following a search by the preventive team, shortages were found in raw materials and final products, leading the Revenue to suspect clandestine removals. The Commissioner confirmed a duty demand of ?52,45,515 along with interest and imposed penalties. The Director explained shortages due to melting loss and manual work, but the Commissioner rejected the explanation, relying on shortages detected during the visit. However, the Tribunal noted that finding clandestine removal based solely on shortages is not valid according to the law. Referring to a precedent, the Tribunal held that shortages alone do not prove clandestine activity without independent corroborative evidence, thus overturning the Commissioner's decision.

Regarding the confirmation of demand for M.S. Ingots and Runners/Risers based on stock shortages, the Tribunal set it aside, emphasizing the lack of independent evidence supporting the shortages. Additionally, a demand of ?3,32,731 was confirmed due to alleged double removal of MS Ingots using the same invoices with overwritten dates. The Tribunal found the overwritten date insufficient evidence for clandestine removal, as there was no proof of the goods being sold twice. Consequently, the Tribunal ruled that this demand was also not sustainable. Ultimately, the Tribunal set aside the impugned order confirming demand and penalties, granting relief to the appellants in both appeals.