2015 (10) TMI 2067 - AT - Central Excise

Clandestine removal of goods - Non maintenance of proper accounts - Held that - he officers do not have a case that there was any irregularity in the accounts maintained by the appellants. According to appellants they paid the duty only because the officers assured them that there would be no action against them and that they could apply for refund. The facts presented by the case reveal that after making the appellants pay the duty, the payment of duty has been taken as the basis for issuing the Show Cause Notice. There is no iota of evidence to establish that the appellants had in any manner connived with VWPPL. Only because they had taken one consignment from VWPPL they have been put into the whole ordeal. The learned counsel for appellants submitted that the appellants have a good reputation and maintain records and pay duty. There has been no instance of allegations. That even though the amount involved may be small, it affects their reputation. These submissions do have substance. Further, the SCN is issued alleging evasion of duty and clandestine removal of goods. Whereas the order passed confirms the demand under wrongful availment of Cenvat Credit. Such an order at the outset in unsustainable. The first appellate authority ought to have considered these aspects without putting the appellant to further hardships of litigation. I find that the appellants have been able to establish a case in their favour. - Decided in favour of assessee.

Summary

Issues: Allegation of clandestine activities, wrongful availment of Cenvat Credit, imposition of penalty

Allegation of Clandestine Activities:
The case involved the appellants, engaged in the manufacture of Flexible Packaging, who were accused of being involved in clandestine activities related to the receipt of unaccounted raw materials. The investigation stemmed from a consignment supplied by a domestic manufacturer, which led to a search of both the manufacturer's and the appellant's premises. Despite the officers' claims of a second consignment being supplied to the appellants, there was no concrete evidence linking them to any clandestine activities. The officers' case lacked irregularities in the appellant's accounts, and the payment of duty was made under the assurance of no further action. The judgment highlighted the lack of evidence connecting the appellants to any wrongdoing, emphasizing their good reputation and compliance with duty payment, ultimately leading to the setting aside of the impugned order.

Wrongful Availment of Cenvat Credit:
The adjudicating authorities had confirmed a demand under Rule 14 of the Cenvat Credit Rules, alleging wrongful availment of Cenvat credit without proper basis in the show cause notice. The appellant argued that the entire allegation was based on an entry from documents found at the manufacturer's premises, and they had paid the amount only upon officers' insistence. The judgment pointed out the discrepancy between the allegations in the show cause notice and the order-in-original, where the demand was confirmed under a different rule. It was noted that the first appellate authority should have considered these discrepancies before subjecting the appellant to further litigation, ultimately leading to the setting aside of the impugned order.

Imposition of Penalty:
In addition to confirming the demand under Rule 14 of the Cenvat Credit Rules, a penalty was imposed under Rule 15. The learned DR supported the findings, emphasizing the materials recovered from the manufacturer's premises as evidence against the appellants. However, the judgment highlighted the lack of substantial evidence connecting the appellants to the alleged clandestine activities, emphasizing that the payment of duty was used as the basis for issuing the show cause notice without proper evidence of connivance. The judgment ultimately favored the appellants, setting aside the impugned order and allowing the appeals.