2005 (9) TMI 139 - AT - Central Excise

Demand - Evidence produced for clandestine manufacture - Pattern of power consumption - HELD THAT - In present case, I find that the Department has not adduced any evidence to substantiate the charge of clandestine removal. There is no iota of evidence that the assessee has purchased any excess raw materials to manufacture any excess ingots in their factory over and above what has been required in their Books of Accounts. The contention of the Deputy Commissioner that the respondent-company could have purchased the raw materials from the market and might have used the same in the manufacture of ingots, was absolutely based on assumption and presumption. It is absolutely a settled principle of law that on the basis of presumption, no adverse conclusion is possible. The onus is on the Department to prove the clandestine manufacture and removal of the goods from the factory. There was no evidence of clandestine manufacture and removal of the goods from the factory. Only some rough note-books were found by the Investigating Officers, which did not reflect the actual production of their factory. The Department has also failed to prove as to whether there was sufficient evidence to prove that power consumption per tonne was based on evidence or records seized from the appellants or was based on any experiment conducted in the premises of the respondent-company. I find in the present case that neither there was a norm of consumption of power nor was there any evidence in the form of private records seized, nor was there any evidence which was based on any norm fixed by the Department under Rule 173E. In the absence of such a record or proof, it cannot be said that any excess production had taken place in the factory during the period in question. Similar view was taken in the case of Hans Castings Private Limited v. Collector of Central Excise, 1998 (3) TMI 298 - CEGAT, NEW DELHI . Thus, I do not find any force in the appeals filed by the appellant herein. Consequently, I dismiss the same. The Cross- Objection filed by the respondent-company stands disposed of, accordingly.

Summary

Issues: Alleged clandestine removal of goods, discrepancies in production figures and power consumption

Analysis:

1. Alleged Clandestine Removal of Goods:
The appellant-Commissioner contended that the observations made by the Commissioner (Appeals) were untenable, specifically regarding the discrepancies in production figures and power consumption. The Commissioner (Appeals) accepted the respondent company's claim that the production figures in their "Private Records" were inflated to secure a bank loan, while the figures in the "Production Register for Bank" were accurate. The appellant argued that the production figures for the bank were crucial for legal transactions, and the excessive power consumption indicated potential irregularities. However, the respondent's consultant emphasized the lack of concrete evidence supporting the allegations of clandestine manufacture and removal of goods. The Tribunal noted that the Department failed to provide substantial proof of clandestine activities, emphasizing the necessity of tangible evidence to support such claims.

2. Discrepancies in Production Figures and Power Consumption:
The primary contention revolved around the discrepancies in production figures and power consumption patterns. The appellant highlighted the significant variance in power consumption per unit of final product between the norms provided by the assessee and the actual consumption figures. The excess energy consumption was attributed to machine age and operator inexperience. However, the Tribunal emphasized the lack of evidence linking these discrepancies to clandestine activities. The absence of concrete proof, such as excessive raw material purchases or conclusive power consumption records, led to the dismissal of the appeals filed by the appellant. The Tribunal reiterated the legal principle that adverse conclusions cannot be drawn based solely on assumptions or presumptions, emphasizing the burden of proof on the Department to establish clandestine activities conclusively.

3. Judicial Precedents and Legal Principles:
In rendering the judgment, the Tribunal referenced various legal precedents emphasizing the necessity of solid evidence to substantiate charges of clandestine activities. The Tribunal highlighted the importance of corroborative evidence and tangible proof to support allegations of clandestine manufacture and removal of goods. The judgment underscored the requirement for cogent and concrete evidence, rather than presumptions, to establish charges of clandestine activities. The Tribunal's decision aligned with established legal principles that demand a high standard of proof in cases involving allegations of clandestine operations.

In conclusion, the Tribunal dismissed the appeals filed by the appellant-Commissioner, citing the lack of substantial evidence to support the allegations of clandestine removal of goods and discrepancies in production figures and power consumption. The judgment underscored the importance of tangible evidence and legal precedents in establishing charges of clandestine activities, emphasizing the burden of proof on the Department to substantiate such claims conclusively.