2019 (5) TMI 463 - HC - Central Excise

Clandestine removal - alleged shortages - HELD THAT - The shortage has been explained by the Internal Auditor. No actual stock taking was done and in view thereof, there is no reason to disbelieve the statement of the Internal Auditor. The charge of clandestine removal is a serious charge and must be supported by evidence. This is completely lacking on the present facts. Appeal dismissed.

Summary

Issues:
Challenge to order under Section 35G of the Central Excise Act, 1944 based on alleged clandestine removal of goods.

Analysis:
1. Facts and Circumstances of the Case:
The respondent, engaged in Forgings and MV Parts, faced allegations of clandestine removal of goods due to discrepancies between declared stock and book balance. The Internal Auditor highlighted instances where items were scrapped without proper documentation, leading to inflated book stock.

2. Legal Challenge and Tribunal's Decision:
The Revenue contested the Tribunal's decision, questioning the validity of demanding duty for alleged clandestine removal without concrete evidence. The Tribunal, citing lack of physical stock taking and panchanama, as well as absence of proof for clandestine removal, relied on a previous High Court decision to rule in favor of the respondent and allowed the appeal.

3. Appellant's Argument and High Court's Analysis:
The appellant argued that the Tribunal disregarded the admission made by the respondent's executives, emphasizing the need for reconsideration. However, the High Court found the explanation provided by the Internal Auditor credible, especially in the absence of actual stock taking. The Court stressed the gravity of the charge of clandestine removal, requiring substantial evidence which was lacking in this case.

4. Final Verdict and Conclusion:
The High Court upheld the Tribunal's decision, deeming it a plausible interpretation of the facts presented. Since no substantial question of law arose from the case, the appeal was dismissed without costs, affirming that the charge of clandestine removal must be substantiated by concrete evidence, which was absent in this instance.