2018 (12) TMI 1101 - AT - Central Excise

Clandestine removal - allegation based upon recovery of the alleged incriminating documents either from the appellant s factory or from the common godown located at Greater Kailash or their Head Office, read with the statements recorded during investigations - opportunity of cross-examination denied - onus of proof - Held that - Though the Adjudicating Authority has discussed each and every document separately but has confirmed the demands by observing that once the said documents are seized by the Revenue, then it is the appellant s turn to rebut the same by production of sufficient evidences. Though, the appellant has given explanation in respect of each and every document but the Adjudicating Authority has observed that they have not produced any evidence on record to show that the entries in the said registers which are private documents were not entries of clandestinely removed goods. It is the Department, who is alleging clandestine removal on the part of the manufacturer and as such the onus to prove so lies upon them. Recovery of the registers/documents/lose papers maintained in the assessee s factory for internal movement of the goods from one section to another, by itself, are not sufficient to establish the clandestine activities - further, Revenue has made no further efforts to find out the source of the procurement of raw material, the actual production in the appellant s factory or transportation of the same or the identity of the buyers and the cash receipt of the consideration for the goods in question. In the absence of these evidences, it is not justifiable to uphold the clandestine removal charges. Benefit of exemption - Basil and Parsley soap with the aid of power - Held that - Inasmuch as the appellant have not rebutted the use of power at various stages of manufacture of the said soaps, they were not entitled to exemption and were required to pay duty. Time limitation - Held that - The use of power was found by the Revenue only subsequently, during the visit of the factory and subsequent investigations. As such filing of declarations, by itself, when the facts have been mis-stated in said declarations cannot come to the aid of the appellant justifying to limit the demand to the normal period of time. Decided partly in favor of assessee.

Summary

Issues Involved:
1. Allegations of clandestine removal of goods.
2. Eligibility for exemption on Basil and Parsley soaps.
3. Invocation of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Allegations of Clandestine Removal of Goods:
The demand of ?37,44,106/- was confirmed against the appellant on allegations of clandestine removal of goods, based on recovery of incriminating documents from the appellant's factory, common godown, and Head Office, along with statements recorded during investigations. The appellant requested cross-examination of deponents, which was partly accepted. The Adjudicating Authority relied on various documents, including Bulk Issue Registers, Outward Registers, Inward Registers, and Bin Card Registers, to confirm the demand. The appellant argued that these were internal records for movement of goods within their factories and that separate demands were raised based on overlapping entries in different registers. The Tribunal found that the Department failed to provide positive evidence such as identification of buyers, transporters, or unaccounted procurement of raw materials, and thus set aside the demand and penalties related to clandestine removal.

2. Eligibility for Exemption on Basil and Parsley Soaps:
The demand of ?36,83,531/- was confirmed on the grounds that Basil and Parsley soaps were manufactured with the aid of power, making them ineligible for exemption under Heading 3401.12. The manufacturing process included the use of air conditioners, packing machines, and electric heaters, which constituted the use of power. The appellant did not provide an alternative manufacturing process. The Tribunal upheld the Adjudicating Authority's findings, noting that the use of power at any stage of production, including packing, amounted to manufacturing with the aid of power, thus disqualifying the soaps from exemption.

3. Invocation of the Extended Period of Limitation:
The appellant contended that they filed duty declarations and monthly returns claiming exemption, thus the extended period of limitation should not apply. The Adjudicating Authority rejected this plea, stating that the appellant made false declarations by not disclosing the use of power, constituting mis-statement and justifying the invocation of the extended period. The Tribunal agreed, emphasizing that the declarations were misleading and intended to evade duty, thereby upholding the demand and penalty.

Conclusion:
The Tribunal set aside the demand of ?37,44,106/- and related penalties for clandestine removal due to lack of positive evidence. However, it upheld the demand of ?36,83,531/- for Basil and Parsley soaps, along with the penalty, due to the confirmed use of power in manufacturing and mis-statement in declarations, justifying the extended period of limitation.