2018 (12) TMI 1022 - AT - Central Excise

Clandestine removal - main allegation in the present case is that the production as shown in the books of account do not correspondent to the statutory register i.e. production register (DSA) and the ER-1 returns - corroborative evidences - Held that - There are no corroborative evidence to suggest that the asessee has manufactured that quantity (which is alleged to have been cleared without payment of duty). To hold the assessee accountable for payment of duty on this account further evidences are essential in nature. The charge of clandestine removal and clearance is a serious charge against the manufacturer which is required to be discharged by the Revenue by production of sufficient and tangible evidence. In the present case, there is no evidence on record except the difference in figures of sale as per ER-I Returns and balance sheet. There is neither any cogent nor any credible evidence on record to prove any surreptitious removal of the finished products. The respondents have satisfactorily explained the difference between the figures as reflected in the Annual Financial Account and those entered in ER-I Returns. The confirmation of duty against the respondent is not justified - appeal dismissed - decided against Revenue.

Summary

Issues: Alleged clandestine clearance, Duty demand, Penalty imposition, Compliance with Cenvat Credit Rules, Discrepancies in production figures, Standard of proof for clandestine removal, Sufficiency of evidence

In the judgment by the Appellate Tribunal CESTAT KOLKATA, the case involved a manufacturer of Biscuits facing allegations of clandestine clearance during 2006-2007, leading to a duty demand of &8377; 31,16,254, along with penalties imposed under Central Excise Rules. The first appellate authority set aside the adjudication order on merit and limitation grounds, prompting the Revenue to appeal before the Tribunal.

The respondent argued that certain varieties of biscuits became nondutiable under Notification No.3/2007-CE, resulting in the production of both dutiable and non-dutiable biscuits. They maintained separate accounts for dutiable and non-dutiable goods but encountered errors during compilation, leading to inflated production figures. The discrepancy arose due to incorrect conversion factors applied in accounting, which were clarified by Chartered Accountants in a letter.

The Tribunal noted that the case originated from discrepancies between sale figures in the Balance Sheet and ER-I Returns, with no corroborative evidence supporting the alleged clandestine clearance. The Tribunal emphasized the need for tangible evidence to hold the manufacturer accountable for duty payment, stating that the charge of clandestine removal requires substantial proof beyond a preponderance of probabilities. Without credible evidence of surreptitious removal, the Tribunal found the duty confirmation unjustified and upheld the appeal, dismissing the Revenue's appeal.

In conclusion, the Tribunal's decision highlighted the importance of substantial evidence in cases of alleged clandestine clearance, emphasizing the need for a high standard of proof and tangible corroboration to support duty demands. The judgment underscored the significance of accurate accounting practices and the requirement for concrete evidence to substantiate allegations of misconduct in excise duty matters.