2019 (9) TMI 644 - AT - Central Excise

Clandestine removal - finished goods cleared without recording such clearance in their Daily Stock Register - demand based on allegation of shortage of goods - principles of natural justice - HELD THAT - The reasons assigned for proposing the duty demand were the shortage of goods found during physical verification on 10.01.2011 and that the details of such goods were not reflected in the ER-1 returns filed during the impugned period from 28.02.2010 to 10.01.2011. It is found that the said physical verification was carried out as per the request of the Appellant to verify the destroyed goods and grant permission to restart production. In the Adjudication order, no finding has been given by the Asstt. Commissioner about the various correspondences exchanged between the Appellant and the Department though the table containing sequence of events were duly submitted by the Appellant in the SCN reply dated 28.07.2016 which is on record. None of the correspondences reflects that the Department had any suspicion regarding the destruction of goods in the fire incident. The only finding given by the Asstt. Commissioner in the Adjudication order is that the Appellant could not furnish the remission certificate to claim waiver from payment of duty - In any case, mere fact of non-submission of remission certificate is not sufficient to draw an adverse inference to level the allegation of clandestine removal. The Appellant could not be made to suffer for the inaction on the part of the Departmental authorities. Since there is no evidence on record to show that the prayer for remission was rejected, the only conclusion that can be drawn is that the instant demand is wholly pre-mature which cannot survive in the eyes of the law - Further, the findings of Asstt. Commissioner and the Ld. Commissioner (Appeals) are contradictory. Lastly, it is now well accepted that the charge of clandestine clearance is a serious charge for which the department has to show positive evidences against the assessee corroborating various factors like unaccounted procurement of raw material and labour, sale of finished goods in cash, etc. - In the instant proceedings, there is no evidence regarding recording of statements of buyer or transporter, recovery of cash towards sale proceeds of goods clandestinely cleared, interception of vehicles carrying the alleged goods by the department. In absence of the aforementioned evidence, the allegation of clandestine removal levelled against the Appellant cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Challenge to Order-in-Appeal confirming duty demand, penalty, and interest
- Allegation of clandestine removal of goods destroyed in fire
- Consideration of remission certificate for waiver of duty
- Contradictory findings by Adjudicating Authority and Appellate Authority
- Lack of evidence supporting allegation of clandestine removal

Analysis:
1. Challenge to Order-in-Appeal: The Appellant challenged the Order-in-Appeal upholding the duty demand, penalty, and interest imposed by the Adjudicating Authority. The Appellant contended that the demand was raised without proper consideration of facts and emphasized that duty demand on goods destroyed in a fire accident, while a remission application is pending, is premature and against the Principles of Natural Justice. Reference was made to a previous Tribunal decision to support the argument that duty liability cannot be imposed on goods destroyed in fire.

2. Allegation of Clandestine Removal: The allegation of clandestine removal was based on assumptions and presumptions without concrete evidence. The Appellant argued that the duty demand was calculated based on the assessable value provided by the Appellant to the Department after the fire incident. It was highlighted that there was no evidence to substantiate the claim of goods being removed without payment of duty, and the charge of clandestine removal lacked supporting evidence.

3. Consideration of Remission Certificate: The Revenue argued that the duty demand should be enforced as the Appellant failed to produce the remission certificate for claiming waiver of duty on goods lost in the fire. However, the Tribunal noted that the Appellant had made efforts to obtain the remission certificate, and the Department confirmed that the request was under active consideration. The Tribunal found that the demand was premature in the absence of evidence showing rejection of the remission application.

4. Contradictory Findings: The Tribunal observed contradictory findings between the Adjudicating Authority and the Appellate Authority regarding the occurrence of the fire accident. While the Appellate Authority acknowledged the fire incident, the Adjudicating Authority doubted its veracity. This inconsistency in findings indicated a lack of diligence in the proceedings.

5. Lack of Evidence for Clandestine Removal: The Tribunal emphasized that the charge of clandestine removal is serious and requires positive evidence. In this case, there was a lack of evidence such as statements from buyers or transporters, recovery of cash proceeds, or interception of vehicles carrying alleged goods. The Tribunal concluded that the allegation of clandestine removal could not be sustained due to the absence of supporting evidence.

In conclusion, the Tribunal set aside the Impugned Order and allowed the appeal filed by the Appellant, highlighting the lack of evidence supporting the duty demand and the premature nature of the demand in the absence of a rejected remission application.