2022 (10) TMI 192 - AT - Central Excise

Clandestine Removal - MS Angles - Channels - Bars - clearance of finished goods without issuance of invoices - corroborative evidences or not - HELD THAT - The amount of Rs. 3,01,69,127/- (Rs.2,99,35,000/- Rs.2,34,127/-) have been accepted by the Income Tax Authority, as income from other sources (property dealing). Thus, there is no reason to treat this amount as attributable to clandestine sales of finished goods. Thus, the duty demand along with penalty of Rs. 37,28,904/- is set aside. Demand of Rs. 7,19,477/- - shortage of stock - HELD THAT - This is corroborated by the documents resumed vide panchnama dated 10.06.2014 (being weighment slips, despatch summary dated 9/10.06.2014). Clandestine removal of shortage in stock (found in verification) is also admitted by the Accountant Mr. R. G. Choudhary, the Despatch Clerk Mr. Anuj Agarwal and the Director Mr. Rajesh Garg. Accordingly, this demand is confirmed with penalty. Appeal allowed in part.

Summary

Issues:
- Whether demand of duty has been rightly confirmed along with penalty on the allegation of clandestine removal.

Analysis:
1. The appellant, engaged in the manufacture of dutiable goods, faced a search in the factory premises revealing a shortage of 151.95 MT of MS Angles. The Manager Accounts admitted to goods being removed without raising invoices, leading to a duty liability of Rs. 7,19,477. Documents recovered during the search indicated clandestine removal of goods without proper invoicing.

2. Statements from the Despatch Clerk, Manager Accounts, and Director confirmed the clandestine removal of finished goods. The Income Tax authorities found undisclosed income related to property business, which the Director admitted. The Central Excise Officer issued a show cause notice proposing duty recovery of Rs. 44,48,381, including penalties under various rules.

3. The adjudication confirmed the duty demand and imposed penalties. The Commissioner (Appeals) rejected the appeal, leading to the appellants approaching the Tribunal. The appellant argued that the undisclosed income from property business, accepted by the Income Tax Authority, should nullify the duty demand related to clandestine sales.

4. The Tribunal found the accepted undisclosed income from property business should not be treated as related to clandestine sales of finished goods. Hence, the duty demand of Rs. 37,28,904 was set aside. However, the demand of Rs. 7,19,477 for shortage of finished stock was confirmed based on corroborated evidence and admissions by the involved parties.

5. The Tribunal partially allowed the appeal by setting aside one demand, confirming another, and adjusting penalties accordingly. The penalty under Section 11AC was reduced, while penalties under Rule 25 and Rule 26 were set aside or reduced. The judgment was pronounced on 04.10.2022.