2016 (6) TMI 227 - AT - Central Excise

Central excise duty evasion on yarn by way of unaccounted clearance - shortage of excisable goods - Held that - As decided in Commissioner of Central Excise & Service Tax , Ludhiana Vs. Anand Founders & Engineers (2015 (11) TMI 1166 - PUNJAB & HARYANA HIGH COURT ) clandestine removal cannot be established only on the basis of shortage of materials detected at the time of stock taking by the officers. Mere shortage detected cannot ipso facto lead to the allegation and findings of the clandestine removal. In the present case, as noticed that even the shortage originally found on stock taking was later adjusted in the de novo proceedings, which only shows that the original stock taking and demand notice based on such verification was not fully correct. When the appellant sought re-verification by the Bond officer, the very next day along with the reasons for their request, it is apparent that such re-verification could have brought out the truth of the correct stock clearly. Appreciating the available evidence in the case, the demand of central excise on account of clandestine removal solely based on the alleged shortage of excisable goods cannot be sustained. Mis-match between the entries in the log book of the packing department and entries in the RG-I - Held that - As already noted, 7 out of 14 entries indicate higher quantity of production entered in the RG-I when compared to the log book in the packing department. No comments or examination of such entries are found in the impugned order. Further, find that the log book in the packing department shows two entries for packing during day/night. Further, the log book maintained in the packing department is apparently due to the requirement of ISO Standards and the quantity mentioned as per older version of the format is for instructions of packers. In any case, if reliance has to be placed on the log book for issue of packing materials, for alleging clandestine removal of excisable goods without entering in the records, corroboration is required to support such allegation. In the present case, there is absolutely no corroboration and the demand is made only on the basis of certain comparison between a non-statutory record maintained for packing materials and the entries in the statutory records, RG-I. Find that no corroboration of any nature has been brought out by investigation to support the allegation of clandestine removal of unaccounted goods. As such, the impugned order is not legally sustainable and accordingly, the same is set aside. - Decided in favor of assessee.

Summary

Issues: Central excise duty evasion on yarn due to unaccounted clearance; Alleged shortage of yarn during physical verification; Discrepancy between log book entries and RG-I records.

In the present case, two appeals were consolidated as they arose from the same order-in-appeal. The appellants, engaged in the manufacture of cotton and polyester yarn, were subjected to central excise duty demand following a physical stock verification that revealed discrepancies in yarn quantities. The Original Authority confirmed a substantial duty demand and imposed penalties, which were upheld by the Commissioner (Appeals), leading to the appellants filing the current appeals.

The first issue revolved around the alleged shortage of yarn discovered during physical verification. The appellant argued that the stock verification was flawed, with loose stock not considered, and requested re-verification due to discrepancies. The reliance on the statement of an individual was contested, especially after the retraction of the statement and lack of evidence supporting clandestine removal. The Tribunal highlighted the lack of inquiry to corroborate the alleged evasion and emphasized the need for substantial evidence beyond mere shortages to establish clandestine removal.

The second issue pertained to discrepancies between entries in the log book of the packing department and RG-I records, forming the basis of another duty demand. The appellant contended that the log book was for packing schedules and did not reflect production or clearance of yarn. The Tribunal noted selective comparisons made by the department without proper examination and highlighted the absence of corroborative evidence to support the allegations of unaccounted clearance. The Tribunal emphasized the necessity of substantial corroboration to establish clandestine removal, which was lacking in this case.

In its analysis, the Tribunal referred to legal precedents emphasizing the insufficiency of shortages alone to prove clandestine removal and the requirement for corroborative evidence. Ultimately, the Tribunal found the demands unsustainable due to the lack of substantial evidence supporting the allegations. The impugned order was set aside, and the appeals were allowed in favor of the appellants.