2016 (1) TMI 1061 - AT - Central Excise

Manufacture and clandestine clearance of goods - MS rounds, bars etc. falling under chapter 7214.90 of CETA - hole issue of manufacture and clandestine removal of excisable goods appears to have emanated from the search of bill traders/agents premises - higher consumption of electricity - Held that - Revenue failed to prove its case - No evidence has been established by Revenue to prove the clandestine manufacture and removal. Therefore merely on the weighment slips from the weighbridge owner and statements and private worksheets of the Bill traders, it cannot be inferred that quantity shown in the weighment slips are actually received by the appellants used in the manufacture of goods and clandestinely as there is no evidence of any records brought out on receipt of the raw materials inside the factory or any evidence of clearance of finished goods from the factory or any documentary proof of receipt of the finished goods by the buyer having received the goods without cover of invoices or any payment particulars of sale and receipt of goods. No evidence advanced by Revenue to connect these weighment slips with either supplier / buyer or to the assessees or to the transporter or to sale proceeds etc. Therefore the burden of proof is on the Revenue to discharge onus and as already discussed in the preceeding paragraphs the revenue has not proved in this case. Further, mere electricity consumption cannot be the only basis for determining duty liability. The demand of central excise duty proposed in then SCN s on clandestine manufacturer and removal has been made only based on assumption and theoretical calculation without any corroborative evidence. - Central Excise duty demanded in the 3 SCNs on excisable goods clandestinely manufactured and cleared by the respondents is not sustainable. - Decided in favor of assessee.

Issues Involved:
1. Alleged evasion of excise duty by clandestine removal of goods.
2. Validity of evidence based on weighment slips and statements from brokers.
3. Applicability of preponderance of probability in proving clandestine removal.
4. Relevance of power consumption data in establishing clandestine manufacture.

Issue-Wise Detailed Analysis:

1. Alleged Evasion of Excise Duty by Clandestine Removal of Goods:
The Revenue appealed against the order of the Commissioner of Central Excise, Chennai, which dropped the majority of the demand for excise duty on the clandestine removal of goods by the respondents. The respondents were accused of evading duty by removing finished goods without payment, using second sale bills. The investigation involved searches and recovery of records from brokers and traders, leading to a demand of Rs. 1,64,38,943/- for the period 1994-95 to 1996-97. The adjudicating authority, however, confirmed a much smaller demand of Rs. 1,96,425/- and imposed a penalty of Rs. 20,000/- on the first respondent, dropping the rest of the proceedings.

2. Validity of Evidence Based on Weighment Slips and Statements from Brokers:
The Revenue's case relied heavily on weighment slips from weighbridges and statements from brokers and bill traders. The adjudicating authority found that these weighment slips were not statutory documents and lacked details linking them to the respondents. There was no verification of the vehicles or transporters involved, nor were statements recorded from weighbridge personnel. The adjudicating authority concluded that the investigation failed to establish a clear link between the weighment slips and the alleged clandestine removal of goods.

3. Applicability of Preponderance of Probability in Proving Clandestine Removal:
The Revenue argued that the preponderance of probability should apply, citing various case laws. However, the adjudicating authority and the Tribunal found that preponderance of probability applies only when supported by concrete evidence. The Tribunal emphasized that clandestine removal must be proved with tangible, direct, and affirmative evidence, such as excess raw materials, actual removal of unaccounted finished goods, discovery of such goods outside the factory, and statements from buyers. In this case, the evidence provided by the Revenue was deemed insufficient to meet this standard.

4. Relevance of Power Consumption Data in Establishing Clandestine Manufacture:
The Revenue also pointed to increased power consumption as indicative of clandestine manufacture. However, the adjudicating authority noted that power consumption can vary due to multiple factors, such as the quality of scrap and the age of machinery. The Tribunal supported this view, referencing the Allahabad High Court's decision in CCE Vs R.A. Castings Pvt. Ltd., which held that electricity consumption alone cannot determine duty liability without corroborative evidence of clandestine manufacture and removal.

Conclusion:
The Tribunal upheld the adjudicating authority's orders, finding no infirmity in the detailed examination of evidence and dropping of demand proceedings. The appeals by the Revenue were rejected, and the cross-objections filed by the respondents were disposed of. The Tribunal reiterated that the burden of proof lies with the Revenue to establish clandestine removal with clear and corroborative evidence, which was not met in these cases.

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