2019 (4) TMI 1263 - AT - Central Excise

Clandestine removal - the stock shown in ER-1 return was not physically present in the factory - HELD THAT - There is self-contradiction in the department s own case. On one hand they are alleging that the stock shown in ER-1 return was not physically present in the factory, at the time of handing over of the possession and on the other hand they are accepting the duty of around ₹ 5.00 Lakhs made by the appellant on the sale of the same stock of rusted MS ingots. Not only that, the lower authorities have confirmed the demand of ₹ 7.76 Lakhs (approx.) in respect of the same quantum of inputs and other materials by treating the same as clandestinely removed - it is very hard to understand that if the stock of the goods was not available in the factory, as alleged by the Revenue, how could the appellant sell the same in the year 2015, on payment of duty, which stands accepted by the Revenue - the findings of the lower authorities as self-contradictory and hence not sustainable. Apart from making a bald allegation of removal of the said goods in a clandestine manner, Revenue has not produced any evidence to that effect. Neither the buyers nor the transporters stand identified by the Revenue. Further there is no proof of receipt of consideration against the said removals. Admittedly when the appellant has reflected their goods in ER-1 returns, they are duty-bound to show the clearance of the same and which clearance stands shown by their in the year 2015 by showing the sale of the rusted ingots. Further Revenue has not made any investigations at the end of the buyers of the said rusted ingots so as to establish the sale as fake. Appeal allowed - decided in favor of appellant.

Summary

Issues: Alleged clandestine removal of goods and duty demand

Analysis:
The judgment pertains to the appellant engaged in manufacturing TMT bars, MS ingots, and other products. The appellant leased a factory in March 2012, and upon termination of the lease, the factory was handed back to the owner. The appellant had a closing stock of final products, duly reflected in their ER-1 return. Subsequently, proceedings were initiated against the appellant, alleging clandestine removal of goods, as no stock was found at the factory during an inspection. The appellant later sold the products as waste and scrap in 2015, paying duty on the same.

The Revenue alleged that the appellant removed goods clandestinely, leading to a duty demand. However, the appellant argued that if the stock was not present at the factory during the lease termination, how could they sell the same goods in 2015 with duty payment accepted by the Revenue. The lower authorities confirmed the duty demand based on the alleged clandestine removal. The tribunal found the Revenue's case self-contradictory, as they accepted duty payment for the sale of goods they claimed were not present in the factory.

Moreover, the tribunal noted the lack of evidence supporting the Revenue's allegations of clandestine removal. No proof of buyers, transporters, or consideration receipt was presented. The appellant had fulfilled their duty to show clearance of goods by reflecting them in ER-1 returns and subsequently selling them in 2015. The Revenue failed to investigate the buyers of the goods to establish the alleged removal as fake. Consequently, the tribunal found no justifiable reasons to uphold the duty demand, setting aside the impugned order and allowing the appeal with relief to the appellant.