2014 (7) TMI 524 - AT - Central Excise

Clandestine remvaol - Assessee showed physical loss in balance sheet - Assessee contends that goods were destroyed on 9.3.01 on account of leakage of water from chilling plant and water bath of tape plant during the holiday festival in 2001 and intimation is given to police station - held that - As regards the intimation to the police authorities, I have been shown the receipted intimation dated 10.3.2001 addressed to the Station Incharge, Police Station Faridpur, Faridpur Bareli intimating that on 10.3.01, the factory was opened and it was found that the same was flooded and approximately 200 MT material lying in the factory got damaged due to water. As such, observation of Commissioner (Appeals) that no intimation was filed with Police cannot be appreciated - Police officer informend Revenue that report of loss of material was given however, since he was not present therefore, there is no record of it. Revenue s entire case is based upon the factum of work-in-progress goods shown as physical loss in the balance sheet. Apart from contending that such loss is much on the higher lower side, and as such creates doubt and there is virtually no evidence to show that said goods were fully manufactured by the appellant and were cleared without payment of duty. The charges of clandestine removal being serious charges are required to be assessed by production of inevitable evidence. It is well settled that demands on the basis of charges of clandestine removal cannot be confirmed on the basis of doubts being entertained by the Excise officer. - Decided in favour of assessee.

Summary

Issues:
Clandestine removal of goods without payment of duty based on physical loss shown in balance sheet.

Analysis:
The appellant, engaged in manufacturing HDPE products, recorded a physical loss of work-in-progress goods in their balance sheet due to water leakage from chilling plant and water bath. The Revenue alleged clandestine removal of goods without duty payment, issuing a show cause notice for duty amounting to Rs. 17,49,504. The original adjudicating authority dropped the demand citing lack of evidence of clandestine removal and no suppression as the facts were reflected in the balance sheet. The Revenue appealed to the Commissioner (Appeals), who reversed the decision based on the abnormal quantity of damaged goods compared to total production, suspecting a cover-up for clandestine removal. The Commissioner found support for clandestine removal from inquiries with police, fire department, and insurance company. However, the appellate authority found no merit in these observations, emphasizing the need for concrete evidence to support charges of clandestine removal.

The appellate tribunal reviewed the case and disagreed with the Commissioner's findings, noting discrepancies in the assessment of physical loss and the lack of substantial evidence for clandestine removal. The tribunal highlighted that serious charges like clandestine removal require undeniable proof, and doubts alone are insufficient for confirming demands. The tribunal set aside the Commissioner's order, reinstating the original adjudicating authority's decision. The judgment underscores the importance of concrete evidence in cases involving allegations of clandestine removal to uphold the principles of natural justice and due process in excise matters.