2016 (8) TMI 660 - AT - Central Excise

Clandestine removal of goods - shortage found of finished goods during physical verification - Held that - there is no other corroboration regarding clandestine manufacture or clearance or transportation of goods or receipt of sale proceeds. While such clandestine activities need not be proved stage by stage with precision, it is necessary to have a clear preponderance of probability which will shift the burden to the assesse to defend his case against non-payment of duty. Here, the very basis of shortage is doubted and as such, any admission of such shortage is of no relevance in the absence of any corroboration. Therefore, the case of clandestine removal cannot be sustained against the appellant. In view of non-availability of very basis of stock taking and physical impossibility of going through the process of weighment of about 250 MTs of M.S. Bars within 2 hours and also arriving at the physical stock upto Kg. level without explaining how measurement was made creates serious lacunae and seriously affected the very basis of revenue s allegation. - Decided in favour of appellant

Summary

Issues: Alleged shortage of finished goods during physical verification leading to demand of central excise duty and penalty.

Analysis:
1. The case revolves around the alleged shortage of finished products during physical verification conducted by the officers, where a shortage of 45 MT of M.S. Bars was found compared to the recorded stock of 290.597 MT. The Original Authority confirmed the duty and imposed a penalty, which was upheld by the Commissioner (Appeals).

2. The appellant argued that the entire case against them is based on the alleged shortage found within a short span of 2 hours during stock taking, which they claimed was not feasible to accurately weigh such a large quantity. The appellant contended that the shortage determination was merely a rough estimate by the officers and lacked proper corroboration for demanding excise duty. The appellant also cited previous cases to support their argument.

3. The Assistant Commissioner supported the lower authorities' findings, emphasizing that the appellant failed to explain the non-availability of finished goods, and the statement of the partner of the appellant-firm indicated clandestine clearance.

4. After hearing both sides and examining the appeal records, it was observed that the case primarily relied on the alleged shortage of finished products during physical verification. The discrepancy of 45 MT was crucial, but the process of weighing around 250 MT of M.S. bars within 2 hours raised doubts about the accuracy and methodology of the stock verification.

5. The Tribunal highlighted the lack of corroborative evidence regarding clandestine activities such as manufacture, clearance, transportation, or receipt of sale proceeds. The Tribunal stressed the importance of a clear preponderance of probability to shift the burden to the assessee, which was lacking in this case due to doubts about the basis of the shortage and the methodology of stock taking. Reference was made to a previous case where an admission regarding stock taking was later found to be inaccurate.

6. Based on the analysis and facts presented, the Tribunal concluded that the case of clandestine removal could not be upheld against the appellant due to significant lacunae in the evidence and methodology used for stock verification. Consequently, the impugned order was set aside, and the appeal was allowed.