2020 (9) TMI 897 - AT - Central Excise

Clandestine Removal - illicit production of plywood on the basis of consumption of resin - demand based only on presumption only without any corroborative evidences - case of appellant is that while issuing the demand, the consumption of resin has been calculated on average basis and not on the basis of thickness viz. resin consumption which was declared at the time of search proceedings - HELD THAT - It is observed that no investigation has been undertaken by the Revenue towards procurement of additional raw materials clandestinely. No other corroborative documents have been produced. Investigations against the consignees have also not been done before raising demand on the allegation of clandestine clearance. The onus is definitely on the department to establish manufacture and clearance of such goods and also regarding the receipt of payment - In the absence of such investigation and evidence, the demand of duty cannot be sustained. Penalty - HELD THAT - Once the demand for duty payable is not sustained, there is no justification to impose penalty on the appellant firm as well as on the partner. Appeal allowed - decided in favor of appellant.

Issues:
1. Seizure of finished goods and raw materials from factory premises.
2. Confiscation of seized goods and imposition of redemption fine, demand, interest, and penalty.
3. Rejection of appeals by Commissioner (Appeals) and challenge before the Tribunal.
4. Calculation of resin consumption and clandestine removal allegations.
5. Allegation of illicit production of plywood based on resin consumption.
6. Lack of investigation and evidence by Revenue for clandestine clearance allegations.
7. Justification for imposing penalty on the appellant firm and partner.

Analysis:
1. The case involved the seizure of finished goods and raw materials from the factory premises of the appellant by the Anti Evasion Unit. The partner of the appellant firm admitted to not maintaining records of stock and undertook to pay Central Excise duty if applicable. The seized goods were provisionally released upon payment of a security deposit and execution of a bond.

2. A Show Cause Notice was issued, leading to the confirmation of confiscation of seized plywood and imposition of a redemption fine, demand, interest, and penalty under Central Excise Rules. The Adjudicating Authority ordered confiscation and imposed penalties for contravention of various rules, with a specific penalty on the partner of the appellant firm.

3. The appeals against the Adjudicating Authority's order were rejected by the Commissioner (Appeals), prompting the appellant to approach the Tribunal for redressal.

4. The appellant's representative argued that the calculation of resin consumption and allegations of clandestine removal were based on presumption without proper documentation or logic. Consumption of resin was calculated on an average basis rather than thickness-based resin consumption declared during search proceedings.

5. The appellant contended that the allegation of illicit plywood production lacked support from Standard Input Output Norms and partners' statements did not admit to clandestine removal. The department did not follow SION norms for plywood production and clearance.

6. The Revenue's representative defended the lower authorities' findings and opposed the appeal, stating that it lacked merit. However, the Tribunal noted the absence of investigations into clandestine raw material procurement and lack of corroborative evidence against consignees before raising demands for clandestine clearance.

7. The Tribunal observed that the Revenue failed to establish manufacture, clearance of goods, or receipt of payments through investigations or evidence. Consequently, the demand for duty was not sustained, leading to the setting aside of the impugned order and allowing the appeals with any consequential benefits for the appellants.

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