2024 (6) TMI 1262 - AT - Central Excise

Clandestine removal of goods - personal penalty of the key management personnel of the Appellant company - loose sheet glass valued not recorded in the RG-1 register - production quantity and sales quantity found to be at variance with RG-1 and RT-12 figures - HELD THAT - The Ld. Commissioner in the impugned Order has noted that the Appellants have not furnished its response to certain facts which weigh heavily against it. Before dealing with the observations made by the Ld. Commissioner, we take note of the fact that the Appellants had duly filed its response to the four issues raised in the impugned Order and therefore the observation that the Appellants have not furnished any response on the four issues is factually incorrect. The suppressed quantities of glass sheets clandestinely removed have been determined by estimating production based on maximum installed capacity and such maximum installed capacity has been determined based on the statement of three employees of the Appellants. The suppressed quantities alleged to be clandestinely removed have been computed by deducting such production from the figures as reported by the Appellants in its RT-12 returns during the period in dispute. The allegation of clandestine removal and suppression of facts on the ground of non-recording of loose glass sheet at the stage of production itself miserably fails. Had the Department also not carried and agreed to the view that the RG-1 stage for loose glass sheets would be the point when such loose sheets are decided to be cleared as such, there was no need to withdraw the letter dated 01.01.1985 by a subsequent letter dated 09.09.1994 which was after the date of the search. No evidence of unaccounted purchases of inputs have been brought on record by making enquiries from the suppliers of such material. There is no evidence of any unaccounted sales which has been brought on record by making enquiries from either the transporters or the buyers of alleged clandestinely removed glass sheets. Interestingly, the SCN notes that enquiries had been initiated against the transporters but no finding, much less an adverse finding, has been noted in the SCN. Even no unaccounted payments to the transporters have been alleged - revenue has utterly failed to discharge the burden of proof by bringing on record any evidence of any kind to substantiate the charge of clandestine removal. Considering the very nature of the industry and the manufacturing process detailed by the Appellants, factors such as normal breakage and thickness of the glass produced have been completely ignored - it is held that maximum installed capacity determined is without any basis whatsoever and is therefore, liable to be rejected. The impugned Order is thus set aside - appeal allowed.

Issues Involved:
1. Allegation of clandestine removal of goods.
2. Discrepancies in statutory records and private records.
3. Method of recording loose glass sheets in RG-1 register.
4. Estimation of production based on maximum installed capacity.
5. Personal penalties on key management personnel.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Removal of Goods:
The Appellants were accused of clandestinely removing glass sheets without proper recording in the RG-1 register and without issuing excise invoices. The Tribunal found that the method of recording loose glass sheets in the RG-1 register was known and permitted by the Department. The Tribunal noted that the Appellants recorded loose glass sheets in the RG-1 register on the next day of clearance at 10 a.m., which was consistent with departmental instructions. The Tribunal held that the allegation of clandestine removal based on non-recording of loose glass sheets at the production stage failed as the method was permitted by the Department.

2. Discrepancies in Statutory Records and Private Records:
The Tribunal observed that discrepancies between private records and statutory records (RG-1 and RT-12) were due to the method of recording loose glass sheets. The Tribunal found that the private records, Daily Production Report (DPR), and the method of recording were consistent and known to the Department. The Tribunal held that the discrepancies did not support the charge of clandestine removal as no corroborative evidence was provided.

3. Method of Recording Loose Glass Sheets in RG-1 Register:
The Appellants argued that they recorded loose glass sheets in the RG-1 register only at the time of clearance, as permitted by the Department. The Tribunal examined departmental letters and instructions, confirming that the method of recording loose glass sheets at the stage of clearance was approved by the Department. The Tribunal rejected the allegation that non-recording of loose glass sheets at the production stage indicated clandestine removal.

4. Estimation of Production Based on Maximum Installed Capacity:
The demand was based on estimated production derived from the maximum installed capacity of the four plants. The Tribunal found that the estimation was based on statements of three employees and mathematical formulas applied to figures from audited financial statements. The Tribunal held that such estimations and assumptions could not substantiate the serious charge of clandestine removal without corroborative evidence. The Tribunal noted that no evidence of unaccounted purchases of inputs, excess consumption of electricity, or unaccounted labor payments was provided.

5. Personal Penalties on Key Management Personnel:
Personal penalties were imposed on key management personnel based on the findings of clandestine removal. Since the Tribunal found the charge of clandestine removal unsustainable, the personal penalties were also set aside.

Conclusion:
The Tribunal concluded that the charge of clandestine removal was not substantiated by tangible evidence and was based on assumptions and estimations. The Tribunal set aside the impugned order, allowing the appeals with consequential relief as per law. The Tribunal emphasized that serious allegations like clandestine removal must be supported by concrete evidence, which was lacking in this case.

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