2013 (7) TMI 708 - AT - Central Excise

Clandestine Removal of finished goods as well as Input - Respondent are engaged in the manufacture of MS Bars falling under chapter 72 of the Central Excise Tariff Act - On checks and verification, a shortage of 187.685 MT of finished goods and 11.335 MT of inputs was detected Director of the company accepted the shortages of goods but did not accept that the finished goods were cleared by them without payment of duty Held that - There was no actual weighment in the stock or MS Bars of Ingot. Such stock-taking was done on the basis of assumption and the calculations made upon the basis of number of bundles available and the average weight of one bundle - It is well settled law that Revenue cannot allege clandestine removal based upon the shortages detected at the time of physical stock taking, without there being any independent corroborative evidence - There is nothing on record to show the clandestine removal Decided against the Revnue.

Summary

Issues:
1. Shortage of finished goods and inputs detected during factory visit.
2. Show Cause Notice issued leading to demand confirmation and penalties imposition.
3. Validity of stock-taking method and absence of evidence for clandestine removal.
4. Comparison with a previous case regarding irregular stock maintenance.
5. Allegation of clandestine clearance without independent corroborative evidence.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner (Appeals) after a shortage of finished goods and inputs was detected during a factory visit. The director of the company accepted the shortages but disputed the claim of goods being cleared without duty payment.

2. Proceedings were initiated against the respondent through a Show Cause Notice, resulting in the Adjudicating authority confirming the demand and imposing penalties. However, the Commissioner (Appeals) set aside the original order, leading to the Revenue's current appeal.

3. The appellate tribunal examined the stock-taking process, which was based on average weights and bundle counts, not actual weighing. The Commissioner (Appeals) found the stock-taking method flawed due to lack of clarity on who conducted the calculations. Without evidence of goods removal by the respondent, the allegation of clandestine removal was deemed unsubstantiated.

4. The tribunal compared the current case with a previous decision of the Madras High Court involving irregular stock maintenance and discrepancies in material quantities. The High Court's ruling emphasized the importance of corroborative evidence to establish clandestine activities, which was lacking in the present case.

5. The Revenue failed to provide evidence supporting the claim of goods being cleared without duty payment. The tribunal highlighted the necessity of independent corroborative evidence for allegations of clandestine removal. Since no such evidence was presented, the tribunal upheld the Commissioner (Appeals) order, rejecting the Revenue's appeal.