2018 (11) TMI 1017 - AT - Central Excise

Clandestine removal - raw material/finished goods - whether the 21 clearances are of raw material or finished goods? - Held that - As regards the demand on 4 clearances mentioned at Serial No. 1 in Para 3 above, I find that on perusal of Note Book 141 seized from the premises of recipient unit (SGS) did record the description of SN-180 or SPP 450, which is of raw material. Therefore, in this fact, the charge of the department that appellant cleared finished goods under these 4 clearances is not sustainable. Regarding the 17 clearances covered under demand shown at Serial No. 2, in table given in Para 3 above, the department has solely relied upon the transporters Lorry Receipts wherein the description of goods mentioned as SOG which is for finished goods. However, on perusal of the Lorry Receipt, I find that the acknowledgment given by the recipient unit clearly mentioned that they have received raw material as description of raw material such as SN-500, SN-180 and SPP-450 mentioned in the acknowledgement stamp. In this position, when there is no clarity coming out from the document and because in the Lorry Receipt, the description is in respect of finished goods i.e. SOG, but the acknowledge receipt shows the goods received by the recipient is raw material, therefore, in my considered view, the benefit of doubt must go to the assessee - in absence of any such evidence and the discrepancy in the Lorry Receipt, it cannot be concluded that the appellant have clandestinely cleared their finished goods. The department could not make out a clear case of clandestine removal beyond doubt against the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand on clearance of raw materials to sister units without reversal of Cenvat credit.
2. Demand on alleged clearance of finished goods to sister units without payment of excise duty.
3. Demand on alleged clearance of raw materials received from HPCL directly to third-party customers without physical receipt of goods in the factory.

Issue-Wise Detailed Analysis:

1. Demand on Clearance of Raw Materials to Sister Units Without Reversal of Cenvat Credit:
The appellants, M/s. Standard Oil and Grease (SOG), were accused of clearing raw materials to their sister units SGS and TGIPL without reversing Cenvat credit, leading to a demand of Rs. 39,74,922/- and Rs. 36,28,545/- respectively. The Tribunal initially set aside these demands, noting that the clearances were of raw materials and thus revenue-neutral. The appellants argued that these clearances were indeed raw materials, supported by transport documents and previous Tribunal rulings that such transactions are revenue-neutral and not maintainable. The Tribunal upheld this view, finding no substantial evidence from the department to prove otherwise.

2. Demand on Alleged Clearance of Finished Goods to Sister Units Without Payment of Excise Duty:
The appellants faced demands for alleged clearance of finished goods to SGS and TGIPL without paying excise duty, amounting to Rs. 4,60,366/- and Rs. 19,47,295/- respectively. The Tribunal remanded these issues for reconsideration, as the initial adjudication lacked detailed reasoning and evidence. Upon remand, the Principal Commissioner confirmed part of the demand (Rs. 20,49,510/-) but dropped Rs. 15,69,460/- after verifying some invoices. The appellants contended that the remaining clearances were also raw materials, not finished goods, and provided transport documents indicating raw material descriptions. The Tribunal found discrepancies in the department's evidence and ruled that the benefit of doubt should go to the appellants, setting aside the demand due to lack of conclusive evidence.

3. Demand on Alleged Clearance of Raw Materials Received from HPCL Directly to Third-Party Customers Without Physical Receipt of Goods in the Factory:
This issue involved a demand of Rs. 2,01,78,241/- based on entries in the Tanker Register from the transporter's premises, alleging that raw materials received from HPCL were cleared directly to third parties without entering the appellants' factory. The Commissioner dropped this demand in the initial adjudication, and it was not contested further by the department.

Conclusion:
The Tribunal, after considering the submissions and evidence, found that the department failed to provide conclusive evidence of clandestine removal of finished goods. The Tribunal emphasized that the burden of proof lies with the department to establish such clandestine activities with corroborative evidence, which was not met in this case. Consequently, the Tribunal set aside the confirmed demand of Rs. 20,49,510/- and allowed the appeal, reiterating the principle that in cases of doubt, the benefit should go to the assessee.