2014 (6) TMI 163 - AT - Central Excise

Refund of amount deposited under protest - allegation of clandestine removal - Incorrect entry in Central excise records - Held that - The appellant s during the course of adjudication has explained the discrepancies and have contended that there was no actual shortages and submitted that in the absence of any other evidences as regards the procurement of the raw material, manufacture of the final product and removal of the goods from the appellant s premises, the findings of clandestine removal are not sustainable - The entire case of the Revenue is based upon the audit objection, which is based on the comparison of entries made in the statutory records vis-a-vis the balance sheet. The appellants have explained such differences by referring to the numbers of their final product as entered in ER-I returns as also on balance sheets. Apart from that I find that there is virtually no other evidence on record to indicate and establish the clandestine manufacture and removal of the goods. It is well settled law that the onus to prove clandestine activities is upon the Revenue and is required to be discharged by production of positive evidences. The demand on the basis of clandestine removal cannot be confirmed on assumptions and presumptions. There being no evidence in the present case to establish any such clandestine activity, I find no reasons to uphold the impugned orders - refund allowed - Decided in favour of assessee.

Issues:
1. Appropriation of duty confirmed against the appellant.
2. Refund of deposited duty dependent on the success of the first appeal.
3. Discrepancies in stock of finished goods as per audit.
4. Show Cause Notice proposing appropriation of duty, interest, and penalty.
5. Contention regarding no actual shortages and lack of evidence for clandestine removal.
6. Onus of proving clandestine activities on the Revenue.
7. Lack of evidence to establish clandestine activity.
8. Setting aside confirmation of demand, interest, and penalty.
9. Entitlement to refund of deposit made under protest.
10. Disposal of both appeals.

Analysis:
1. The judgment involves two appeals arising from the same set of facts and circumstances. In the first appeal, the lower authorities confirmed a duty of Rs. 2,02,126 against the appellant, which was paid by them. The second appeal relates to the refund of this deposited duty, dependent on the outcome of the first appeal.

2. The appellant, engaged in the manufacture of filter bags and cages, faced discrepancies in the stock of finished goods as per audit findings compared to their statutory records. The Revenue alleged that the appellant cleared goods without paying duty, leading to the deposit of the disputed amount under protest and subsequent refund claim.

3. A Show Cause Notice was issued proposing appropriation of the duty, interest, and penalty. The lower authority's order, upheld by the Commissioner (Appeals), resulted in the present appeal challenging the findings.

4. During adjudication, the appellant explained the discrepancies, denying actual shortages and contesting the Revenue's claim of clandestine removal. The lack of evidence regarding procurement, manufacturing, and removal of goods led to the confirmation of demand by the lower authorities.

5. The judgment emphasizes that the onus of proving clandestine activities lies with the Revenue, requiring positive evidence. In this case, the audit objection and discrepancies in records were insufficient to establish clandestine activities. As a result, the demand based on assumptions and presumptions was set aside, leading to the allowance of Appeal No. E/1275/2011.

6. With the confirmation of demand overturned, the appellant became entitled to the refund of the deposit made under protest. Consequently, the denial of the refund in Appeal No. E/1916/2011 was set aside, granting consequential relief to the appellant.

7. The judgment concludes by disposing of both appeals in favor of the appellant, highlighting the lack of evidence to support the Revenue's claims of clandestine activities and emphasizing the importance of meeting the burden of proof in such cases.

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