2016 (3) TMI 98 - AT - Central Excise

Clandestine removal of goods - Held that - Unaccounted goods found packed and ready for dispatch in factory premises does not by itself constitute sufficient evidence to show that the goods are meant for clandestine clearance. The same view has been taken by this Hon ble Tribunal in the recent judgments in the cases of Karnawat International Pvt. Ltd., and Shubh Metals (2015 (12) TMI 1139 - CESTAT NEW DELHI ). Also see M.B. Laminators case 2013 (8) TMI 426 - CESTAT AHMEDABAD In view of the above analysis, it is held that there is no sufficient evidence in the present case to establish intention to remove goods in a clandestine manner and to evade duty. Hence, the OIO and the impugned OIA are set aside. Consequently, redemption fine and penalty are also set aside. - Decided in favour of assessee

Summary

Issues: Alleged evasion of Central Excise duty and fraudulent availment of Cenvat credit involving unaccounted stock of finished goods.

Analysis:
1. Allegations of Evasion: The appellants, engaged in manufacturing copper products, were accused of evading Central Excise duty and fraudulent Cenvat credit by not accounting for 29714 kgs of finished copper goods valued at Rs. 99,43,450 found unaccounted during a physical verification. The authorities believed the goods were intended for clandestine clearance without duty payment.

2. Show Cause Notice and Adjudication: Following the search, a show cause notice was issued, leading to adjudication by the Additional Commissioner and subsequent modification by the Commissioner (Appeals). The appellants contested the decision before the Tribunal.

3. Appellant's Defense: The appellants argued that the goods found were not fully finished but required further operations and testing to reach the final stage, hence not necessitating entry in the RG-1 Register. They presented a Certificate of Chartered Engineer supporting their claim.

4. Legal Precedents: The appellants cited various case laws supporting their position, emphasizing the absence of evidence for clandestine clearance or irregularities.

5. Respondent's Position: The Authorized Representative contended that the goods were indeed finished and ready for export, questioning the timing of the appellant's claim regarding further operations and testing.

6. Tribunal's Observations: The Tribunal noted discrepancies in the statements and lack of evidence supporting the allegation of intent for clandestine clearance. The case of Nissan Copper Pvt. Ltd. was distinguished due to differing circumstances.

7. Legal Precedents and Analysis: Referring to the Supreme Industries Ltd. case, the Tribunal emphasized the necessity for strict proof of intent to evade duty, which was lacking in the present matter. Previous judgments, including M.B. Laminators, supported the view that unaccounted goods alone do not prove clandestine clearance intent.

8. Decision: The Tribunal concluded that insufficient evidence existed to establish intent for clandestine removal and duty evasion. Consequently, the original and appellate orders were set aside, along with the redemption fine and penalty, leading to the allowance of both appeals.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal precedents relied upon, and the Tribunal's reasoning leading to the final decision in favor of the appellants.