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2019 (12) TMI 620 - AT - Central ExciseClandestine removal - excess usage of raw material Sponge Iron, than mentioned - entire demand is based on the closing balances shown in the ER-1 and ER-6 return - The entire SCN is based on inconsistency and the department is taking two stands while calculating the duty on the said finished goods. The department is demanding duty on TMT Bars and Slag only whereas no demand in respect of runners and risers and M.S scrap was raised in the present SCN. HELD THAT - The entire demand is based on the yield of production of M.S Ingot which is further used in the manufacturing of TMT Bars. The yield of production was in respect of only a particular month which was uniformly applied for entire demand of Central Excise Duty. At no point or stage, Department has able to prove that the appellant during the relevant period was having electricity connection to manufacture M.S Ingots and TMT Bars. It is an admitted fact that for the period the demand has been raised, the appellant did not have any power connection. Department has also failed to produce that there is any other alternate source of power to manufacture those goods. In such a situation, it is very clear that the entire demand is based on mere average yield of production and no concrete evidence to manufacture the alleged goods has been brought on the record by the department. The statement which has been relied upon by the department is only in respect of month of June 2013 which is uniformly applied for calculating the demand. It is a well settled principle of law that charges of clandestine removal cannot be based on series of assumptions and presumptions whereas should be based on evidences like unaccounted purchase of raw materials, receipt and consumption of raw materials, freight payment for movement of such raw material, dis-proportionate power consumption, capacity utilization and labor employed, unaccounted sales proceeds and substantial cash recovery from office or factory premises, and so on - In the present case, these clinching evidences are absolutely missing and therefore charges of clandestine removal cannot be held sustainable for demand of ₹ 2,86,17,242. Demand of ₹ 48,75,834/- which is based on the invoices issued by the appellant during the period 08.01.2014 to 10.01.2014 for a quantity of 1059.920 - HELD THAT - The said demand is confirmed by the Ld. Commissioner merely on the ground that some of the vehicle number shown in the invoices are incapable of transporting the alleged goods. The said conclusion was drawn by the Ld. Commissioner only citing the few incidents, wherein number of cases no inquiries were made either from the transporters or from the recipients of the goods. Out of 27 transporters, statements of only 7 transporters were recorded by the officers and only 2 appeared for their cross-examination - In such a scenario, we are inclined to accept the contention of the appellant that in absence of the statements of the recipients of the goods and cross-examination of all the transporters whose statements were recorded, it cannot be concluded that no goods were cleared from the appellant s premises. In absence of sufficient evidences which are essential to prove the charges of clandestine manufacture and its removal from the factory of the appellant, the demand which are based on the invoices issued by the appellant during the period of 08.01.2014 to 10.01.2014 is also not maintainable and hence liable to be set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Confirmation of Central Excise Duty demand. 2. Imposition of penalty on the company and its director. 3. Allegation of clandestine removal and manufacturing without payment of duty. 4. Reliability of evidence and statements used to confirm the demand. 5. Consistency and legitimacy of the show cause notice. Issue-wise Detailed Analysis: 1. Confirmation of Central Excise Duty demand: The Principal Commissioner confirmed a demand of Central Excise Duty amounting to ?3,38,76,645/- along with interest under Section 11AA of the Central Excise Act, 1944. The demand was based on the alleged clandestine removal of goods without payment of duty, inferred from the closing balances shown in the ER-1 and ER-6 returns. 2. Imposition of penalty on the company and its director: An equivalent penalty under Section 11AC of the Central Excise Act, 1944, was imposed on the appellant. Additionally, a separate penalty of ?50,000,00/- was imposed on the Director of the company under Rule 26 of the Central Excise Rules, 2002. 3. Allegation of clandestine removal and manufacturing without payment of duty: The department alleged that the raw material Sponge Iron (6371.130 MT) and MS Ingot (111.430 MT) were used for manufacturing M.S Ingots and TMT bars, which were cleared without payment of duty prior to July 2013. This was inferred from the absence of stock and production records during the officers' visit on 31.01.2014. The department also questioned the authenticity of invoices issued for TMT bars during 08.01.2014 to 10.01.2014, claiming they were fictitious. 4. Reliability of evidence and statements used to confirm the demand: The appellant argued that the demand was based on inconsistent and unreliable evidence. They contended that the department's reliance on the closing balances in the ER-1 and ER-6 returns was contradictory, as not all entries were considered for the demand. The appellant also highlighted the lack of material evidence to prove the alleged manufacturing and clearance of goods. They emphasized that the percentage yield used by the department was derived from a single month (June 2013) and could not be uniformly applied to the entire period. 5. Consistency and legitimacy of the show cause notice: The appellant argued that the show cause notice was vague and contradictory, as it selectively considered entries from statutory documents. They cited legal precedents to support their claim that the show cause notice should be specific and consistent. The appellant also questioned the department's failure to provide evidence of unaccounted purchase of raw materials, electricity consumption, labor employed, and other factors necessary to substantiate the charges of clandestine removal. Judgment: The Tribunal found that the entire demand was based on the yield of production for a particular month (June 2013) and was applied uniformly without concrete evidence of manufacturing. The Tribunal noted that the appellant did not have an electricity connection during the relevant period, and no alternate power source was proven. The Tribunal held that the charges of clandestine removal could not be based on assumptions and required concrete evidence, which was missing in this case. Regarding the demand based on invoices issued during 08.01.2014 to 10.01.2014, the Tribunal found that the department's conclusion was based on a few incidents and lacked comprehensive inquiries from transporters and recipients of goods. The Tribunal accepted the appellant's contention that in the absence of sufficient evidence and cross-examination of all transporters, the demand was not maintainable. Conclusion: The Tribunal set aside the impugned order, allowing the appeals filed by the appellant and its Director, and provided consequential relief to the appellant. The judgment emphasized the need for concrete evidence to support allegations of clandestine removal and the importance of consistency and specificity in show cause notices.
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