2015 (3) TMI 867 - AT - Central Excise

Clandestine removal of goods - Shortage of goods found - Charges framed on the basis of statement of appellant no. 2 - Held that - appellant No.1 had taken stand that Shri Hakim Thanawala is not concerned with the appellant firm. It seen from the show cause notice that Central Excise officers visited the appellant s premises on the basis of intelligence and thereafter how they accepted Shri Hakim Thanawala as Director of the Company when the appellant firm is registered with the Central Excise authorities as partnership firm. It is strange that the Central Excise officers visited the premises of the assessee and conducted stock verification and recorded the statement without verifying the identity of a person. There is no material available on record to establish that Shri Hakim Thanawala has any connection with the appellant firm. - it is the responsibility of the Revenue to identify the person while recording the statement. It is seen that no statement of any employee of the appellant firm was recorded. The Central Excise officers visited the premises of the appellant firm on 06.3.2007 and show cause notice was issued on 02.6.2009 and no verification was conducted or otherwise. Thus, the demand of duty on the basis of the stock statement and statement of a person, who has no relation with the Appellant firm, can not be sustained. - However, reduced penalty on the 2nd appellant is sustained. - Decided partly in favour of appellants.

Summary

Issues:
1. Central Excise duty demand on shortage of finished goods.
2. Imposition of penalty on the appellants.
3. Validity of stock verification and statement recorded.
4. Claim of Directorship in a partnership firm.
5. Burden of proof on Revenue for clandestine removal of goods.

Central Excise Duty Demand on Shortage of Finished Goods:
The case involved a partnership firm engaged in manufacturing goods under Chapter 33 of the Central Excise Tariff Act, 1985. A stock verification report recorded a shortage of finished goods with duty implications. The adjudicating authority confirmed the duty demand, interest, and penalties, which were later modified by the Commissioner (Appeals). The appellants contested the shortage claim, arguing no stock verification was conducted and challenging the basis of the demand.

Imposition of Penalty:
The penalty was imposed on both the partnership firm and an individual claimed to be a Director of the firm. The appellants disputed the Director's association with the firm, highlighting the nature of a partnership firm and the lack of evidence supporting the claim of clandestine removal.

Validity of Stock Verification and Recorded Statement:
The stock verification was conducted in the presence of the individual claimed as Director and the production Incharge. The appellants contested the Director's role and the validity of the recorded statement, emphasizing discrepancies in the identification of the individual and the lack of verification regarding the firm's operations.

Claim of Directorship in a Partnership Firm:
The appellants argued against the existence of a Director in a partnership firm, asserting that the individual in question had no association with the firm beyond being a relative to the partners. They challenged the premise of the Director's statement being the basis for duty demand, emphasizing the firm's registration and governance structure.

Burden of Proof on Revenue for Clandestine Removal of Goods:
The Tribunal emphasized the Revenue's responsibility to establish clandestine removal, citing precedents where the sole statement of a Director was insufficient without corroborating evidence. The Tribunal highlighted the lack of verification and identification procedures during the investigation, questioning the basis for the duty demand and penalties.

In the final judgment, the duty demand and penalties on the partnership firm were set aside due to lack of substantiated evidence. However, a reduced penalty was upheld for the individual associated with misleading statements. The judgment underscored the importance of proper verification, burden of proof on Revenue, and adherence to legal principles in excise duty cases.