2004 (12) TMI 214 - AT - Central Excise

Demand - Unaccounted raw tobacco and clandestine removal of cut tobacco - duty evasion - penalty - HELD THAT - The Revenue has come to the conclusion that 41, 777 kgs. of raw tobacco was unaccounted and the appellant had manufactured cut tobaccos out of it and removed it clandestinely. The inference is based on certain private documents only. There is no corroborative evidence recorded. If such huge quantity of cut tobacco was manufactured during the period from April 1998 to September 1998 when the factory is under physical control and removed either the officer in charge has connived with the appellants or he closed his eyes to whatever was happening. In either case the department should have proceeded against the officers. There is absolutely no indication in the investigation regarding any complicity of the officers posted in the appellants unit. Moreover the investigation has not found out at least a few buyers who have received the goods cleared clandestinely. There is no evidence of excessive consumption of electricity. When the officers visited the unit they had not found out any unaccounted stock of cut tobacco. In the present case the charges are based purely on a theoretical working out based on the private documents which are not statutory. Thus the OIO has no merits. It deserves to be set aside. Hence we allow the appeals.

Summary

Issues Involved: Alleged duty evasion and penalty imposition on the appellants for unaccounted raw tobacco and clandestine removal of cut tobacco.

Summary:
The case involved an appeal against the Order-in-Original (OIO) passed by the Commissioner of Central Excise, Hyderabad, alleging duty evasion and penalty imposition on the appellants, a tobacco manufacturing company. The Department claimed that the appellants had not accounted for a quantity of raw tobacco, leading to the production and clearance of cut tobacco without duty payment. The adjudicating authority confirmed a duty demand, imposed penalties, and demanded interest. The appellants challenged these findings strongly.

The appellants argued that their unit was under physical control, making it unlikely for a large quantity of cut tobacco to be removed clandestinely. They contended that the Department's allegations were based on voluntary documents provided by them, without any concrete evidence to support the claims. The appellants also highlighted discrepancies in the Department's conclusions regarding the raw tobacco quantities used in manufacturing cut tobacco, emphasizing clerical errors and the maintenance of secrecy in blend sheets.

After thorough examination of the case records, the Appellate Tribunal found that the Department's conclusions were solely based on private documents without corroborative evidence. The Tribunal noted the lack of proof of complicity by the officers in charge or excessive consumption of electricity, which would have indicated clandestine activities. Citing precedents, the Tribunal emphasized that charges of clandestine removal cannot rely on assumptions and presumptions, and duty cannot be demanded on assumed productions. The Tribunal criticized the adjudicating authority for reaching conclusions without sufficient evidence and overturned the OIO, ruling in favor of the appellants.

In conclusion, the Tribunal set aside the OIO, stating that it lacked merit and allowed the appeals of the appellants.