2007 (10) TMI 217 - HC - Central Excise

Tribunal held that Revenue has failed to produce any evidence of clandestine removal & sale of goods - tribunal found that demand of duty on raw material found short is based on the presumption that the raw material must have been used in mfg. final products - suspicion cannot replace the requirement of proof by presuming that there was mens rea - jurisdiction of Tribunal u/s 35A & 35C is different from power of HC u/s 35G revenue s appeal dismissed tribunal order is justified

Summary

Issues:
1. Appeal challenging order of the Tribunal regarding duty demand on raw material and finished goods.
2. Calculation of duty based on presumption of raw material usage.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
4. Tribunal's decision on penalty and evidence of clandestine removal.
5. Consideration of judgments by the Tribunal in similar cases.
6. Tribunal's findings based on evidence and absence of mens rea for duty evasion.

Analysis:

1. The Revenue filed an appeal challenging the Tribunal's order on duty demand, citing lack of evidence of clandestine removal and sale of goods. The Tribunal found the demand based on the presumption of raw material usage for final products without duty payment, noting the immediate duty payment upon shortage ascertainment.

2. The case involved a company manufacturing paper using waste paper as the main raw material. The Revenue discovered shortages in finished goods and raw material during a visit, leading to duty demands and penalties. The Adjudicating Authority upheld the duty demand based on raw material presumption despite explanations by the company.

3. The imposition of penalty under Section 11AC was a key issue. The Tribunal set aside the penalty in an earlier order, which was challenged and remanded by the High Court for fresh consideration. Subsequently, the Tribunal again ruled against the penalty due to the absence of evidence of fraud or willful misstatement.

4. The Tribunal's decision on the penalty was based on the lack of proof of clandestine removal and duty evasion. The Tribunal emphasized the absence of mens rea for duty evasion and highlighted the immediate duty payment upon shortage discovery as a factor against invoking Section 11AC.

5. The appellant's counsel cited judgments from similar cases to support their argument for penalty imposition. However, the Court found the Tribunal's findings to be sound, emphasizing the need for evidence over suspicion in cases involving duty evasion and penalty imposition.

6. The Court dismissed the appeal, upholding the Tribunal's decision based on evidence and the absence of intent to evade duty. The Court reiterated that Tribunal orders do not set precedents for High Courts and emphasized the importance of proof over suspicion in cases involving duty evasion and penalty imposition.