2015 (1) TMI 170 - AT - Central Excise

Shortage in stock and raw material - Clandestine removal of goods - Non verification of statement of assesse - Held that - Revenue s entire case is based upon the alleged shortages detected at the time of visit of officers, read with statement of partner recorded on 10-1-2011. However, it is seen that on 11-1-2011, the said partner addressed a letter to their Assistant Commissioner, Anti-Evasion, the concerned officer, making reference to the visit of officers in his factory and clarifying that though he had given the explanation that short found goods were lying red hot in the furnace but the officers did not make any verification of the same. there is no evidence to show that furnace area was also checked to verify the fact that as to whether any final product was lying there or not. It is otherwise also seen that to weigh such heavy stock of raw material as also the final product, the inventory are required to be made and that such heavy stock cannot be weighed. There is no evidence on record to show as to how such weighment was undertaken by the visiting officers. There is no evidence of clandestine removal except the alleged shortages, which are also doubted. In the absence of evidence of clandestine removal, the confirmation of demand of duty based upon the alleged doubtful shortages read with statement of authorised person recorded at the time of search of the factory itself, cannot be considered to be sufficient evidence so as to lead to inevitable conclusion of clandestine removal. Tribunal in the case of Commissioner of Central Excise, Meerut-I v. Silvertone Papers Ltd. - 2013 (3) TMI 184 - CESTAT NEW DELHI has considered the entire case law on the issue and has held that the alleged shortages read with statement of one of authorised representative, cannot be held to be sufficient evidence so as to uphold the finding of clandestine removal. Revenue, after recording the statement, which stand retracted immediately on the next date, has not bothered to make further investigation and to record statement of persons who are actually concerned with the manufacture of goods as also of the clearance and marketing of the same. No identity of the buyers of the raw material, etc., stand identified. As such, by extending the benefit of doubt to the appellant, I set aside the impugned order - Decided in favour of assesse.

Summary

Issues:
1. Shortage of stock of final product and raw materials during physical stock verification.
2. Confirmation of demand, interest, and penalties based on shortages.
3. Allegations of clandestine removal.
4. Adequacy of evidence to prove shortages and clandestine removal.

Analysis:
1. The appellant, engaged in manufacturing copper wire rods, faced proceedings due to shortages of final products and raw materials during a physical stock verification. The partner admitted the shortages, leading to a demand of &8377; 1,27,002/-, interest, and penalties. The Commissioner (Appeals) upheld the order, prompting the present appeal.

2. The Revenue's case relied on alleged shortages detected during the visit and the partner's statement. However, the partner later clarified that the goods were in the furnace area, not missing. Lack of verification in the furnace area and absence of proper weighment procedures raised doubts about the shortages' accuracy.

3. The judgment highlighted the lack of evidence supporting clandestine removal, casting doubt on the demand confirmation based on doubtful shortages and statements. Citing precedent, the Tribunal emphasized that shortages and statements alone are insufficient to prove clandestine removal. The Revenue's failure to conduct further investigations or identify buyers of raw materials weakened their case.

4. Ultimately, due to insufficient evidence and doubts surrounding the alleged shortages and clandestine removal, the impugned order was set aside. The appellant was granted relief based on the benefit of the doubt. The judgment emphasized the importance of thorough investigations and conclusive evidence in cases involving allegations of clandestine activities.