2018 (10) TMI 148 - AT - Central Excise

Clandestine removal - shortage of stock and finished goods - the entire case of the Revenue is based upon the entries made in the recovered records read with statement of various persons - Held that - Commissioner has clearly observed that the second furnace though installed in the factory but was not in operation inasmuch as the said fact stands deposed by various deponents in the statement itself - The Adjudicating Authority has also verified the fact that the entries made in the so called incriminate documents fully match with the clearances reflected in the RG-1 record. Each and every entry has been dealt with by him and has been found to be cleared on payment of duty. Though there are minor variations on the comparison of both the entries but the Adjudicating Authority has observed that such differences, which are very minor are on account of wrong entries as almost all the entries have been found to have been cleared on payment of duty by reflecting the same in RG-1 register. The entire case of the Revenue is based upon entries made in the record resumed from assessee and there is no evidence of establishing clandestine activity on the part of the assessee. Even the separate case made out against them based upon the shortages of the raw material and final product stand allowed by Commissioner (Appeals) by way of different Order-In-Appeal, in the absence of any cogent evidences, duty demand cannot be upheld. The demand of duty cannot be upheld against the assessee on the allegations of clandestine removal - appeal dismissed - decided against Revenue.

Summary

Issues:
Allegations of clandestine removal and duty demand based on recovered records and statements.

Analysis:
The appeal was filed by the Revenue against the order vacating the show cause notice issued to the Respondents. The case revolved around the Respondents engaged in manufacturing M.S. Ingots using Cenvat Credit. During a visit to their factory, officers found discrepancies in stock, leading to a separate show cause notice. The officers also discovered two Induction Furnaces in the factory with varying capacities and sanctioned electricity load. Simultaneous searches at another factory revealed records related to the Respondents' production. Statements implicated the Respondents in clandestine activities, prompting further investigations and summoning of Directors. The show cause notice alleged clandestine removal and proposed a duty demand of ?82,33,223 along with penalties. The Commissioner adjudicated the notice, finding the allegations unsustainable and dropping the proceedings, leading to the Revenue's appeal.

The Commissioner's order was based on entries in recovered records and statements. However, it was observed that the second furnace was not operational during the visit, as confirmed by deponents and Panchnama proceedings. The Adjudicating Authority verified that entries matched clearances in RG-1 records, with minor discrepancies attributed to wrong entries, but all entries were cleared on payment of duty. The Revenue's case relied on the operation of the second furnace, which was deemed unsustainable due to lack of evidence. The Adjudicating Authority's findings, unchallenged by the Revenue, highlighted the absence of evidence supporting clandestine activity by the Respondents. Even the separate case regarding shortages was allowed in favor of the Respondents due to lack of substantial evidence. Consequently, the impugned order was upheld, and the Revenue's appeal was rejected.

In conclusion, the judgment centered on the lack of evidence supporting the Revenue's allegations of clandestine removal against the Respondents. The findings of the Adjudicating Authority, supported by the Commissioner's observations, emphasized the absence of concrete proof of wrongdoing by the Respondents. The discrepancies in records were addressed, and the decision to drop the proceedings was deemed appropriate based on the lack of substantial evidence. The appeal was dismissed, affirming the Commissioner's decision in favor of the Respondents.