2014 (8) TMI 534 - AT - Central Excise

Shortage in stock - Clandestine removal of goods - Held that - alleged shortages were detected by the officers at the time of visit to the appellants factory on 21.11.08. Immediately on the next date, the appellants addressed a letter dated 22.11.08 to their jurisdictional Asstt. Commissioner denying that there was any shortages and submitted that entire goods were imported by them and were having specific mark of identification traceable batch number and specifications. The same can neither be procured from the indigenous market nor can be sold in the local market inasmuch as the same are not being used by any other manufacturer in India. They have more than 300 items of various inputs and the entire stock taking was done without actually indicating the stock position. The appellants also contended in the said letter that after the officers left, they re-examined their stock and found the same to be in order. The entire case of the Revenue is based upon the shortages admitted at the time of visit of the officers. Though the appellant immediately reconciled their stock position by writing letters to their jurisdictional Central Excise authorities and requested them for reverification, no further action was taken by the department. In any case and in any view of the matter, apart from the shortages, there is no other evidence on record to show that the appellants have cleared their raw materials without payment of duty. mere shortages by itself cannot lead to inevitable conclusion of clandestine removal, even though the assessee might have accepted to discharge their duty liability in respect of said shortages - no justification for upholding the finding of clandestine removal against the appellant and consequent confirmation of demand of duty or imposition of penalty upon both the appellants - Decided in favour of assessee.

Summary

Issues: Alleged shortages of raw material leading to duty demand and clandestine removal

Analysis:
The judgment by Ms. Archana Wadhwa of the Appellate Tribunal CESTAT NEW DELHI dealt with two appeals arising from the same impugned order regarding alleged shortages of raw material by M/s. Fusion Electronics Pvt. Ltd., a manufacturer of printed circuit boards and assemblies falling under Chapter 85 of the Central Excise Tariff Act, 1985. The Central Excise officers detected shortages during a visit to the factory, resulting in duty amounting to &8377; 3,64,909. The Revenue initiated proceedings against the appellants, culminating in an order upheld by the Commissioner (Appeals), leading to the present appeal.

Upon reviewing the submissions, it was noted that the alleged shortages were immediately contested by the appellants through letters to the jurisdictional Asstt. Commissioner, emphasizing that the goods were imported with specific identification markings and traceable batch numbers. The appellants requested reverification of their stock, highlighting the unique nature of the imported items that could not be procured locally. The Director of the manufacturing unit attributed the stock discrepancies to human error and negligence, denying clandestine removal.

The Revenue's case primarily relied on the shortages detected during the officers' visit, with no additional evidence indicating duty evasion. The appellants' proactive response and detailed explanation regarding the unique nature of the imported raw material components undermined the clandestine removal allegations. The judgment referenced established precedents emphasizing that shortages alone do not conclusively prove clandestine removal, especially when the duty liability for shortages is acknowledged by the assessee.

Ultimately, the Tribunal found no basis to uphold the finding of clandestine removal or the duty demand and penalties imposed on the appellants. The impugned orders were set aside, and the appeals were allowed, providing relief to M/s. Fusion Electronics Pvt. Ltd. The judgment highlighted the importance of substantive evidence beyond shortages to establish clandestine removal, reaffirming the legal principle that shortages alone do not lead to inevitable conclusions of duty evasion.