2006 (6) TMI 38 - AT - Central Excise

Central Excise Clandestine removal Clandestine removal cannot be established on the basis of that balance sheet showing higher production figures to obtain higher bank loan by the assessee

Summary

Issues:
1. Discrepancy in Balance Sheet and RG1 Register figures leading to alleged clandestine manufacture and removal of goods without payment of duty.

Analysis:
The appeal stemmed from an Order-in-Appeal where the Commissioner concluded that a mere difference in stock figures between the Balance Sheet and RG1 Register does not automatically imply clandestine activities. The Commissioner highlighted the absence of evidence supporting the claim of intentional evasion of duty or clandestine clearances. The Tribunal referenced previous cases to emphasize that discrepancies in financial records alone are insufficient to establish clandestine removal. The burden of proof lies with the Revenue to provide affirmative evidence, which was found lacking in this case. Consequently, the Tribunal set aside the impugned order and ruled in favor of the appellants, emphasizing the necessity of concrete evidence to support allegations of clandestine activities.

The JCDR argued that any discrepancy between the Balance Sheet and RG1 Register indicates clandestine activities, shifting the burden of proof to the assessee. However, the Consultant contended that the Revenue must demonstrate the entire process of production, sale, and fund flow to substantiate claims of clandestine manufacture and clearance. The Consultant supported the Commissioner's decision, highlighting the absence of evidence from the Revenue to prove clandestine activities during the relevant period. The Tribunal upheld the Commissioner's decision, emphasizing the need for concrete evidence, such as proof of input purchase, production process, and goods clearance, to establish clandestine activities.

The Tribunal carefully analyzed the case, emphasizing that discrepancies in production figures on the Balance Sheet do not automatically imply evasion of duty. It stressed the importance of thorough investigation and evidence to substantiate claims of clandestine manufacture and clearance. The Tribunal noted the lack of evidence, such as statements from factory personnel or transporters, to support the Revenue's allegations. Ultimately, the Tribunal upheld the Commissioner's decision to dismiss the proceedings, citing the need for concrete evidence to establish clandestine activities.