2016 (8) TMI 748 - AT - Central Excise

Invokation of extended period of limitation - Section 11A(1) of the Central Excise Act 1944 - Clandestine removal of goods - availed area based exemption vide Notification No.32/99 dated 08.07.1999 granting 100% duty exemption - Held that - the charges of clandestine removal are serious charges and in the absence of any evidence of removal/seizure of finished goods, it cannot be held a justifiable ground for confirmation of the act of clandestine production and removal. We also find that there was no proper stock taking and there is no evidence showing the manufacture of the goods and their clearances without payment of duty. Clandestine removal being a positive act, the burden of proving the same is on the Revenue and cannot be discharged on the basis of conjectures and assumptions. The appellant is also the beneficiary of the North East exemption vide Notification No.32/99-CE and it defies logic as to why appellant will indulge in clandestine manufacture and removal when they are entitled to cash refund of the duty paid through PLA. There is nothing on record to indicate that the appellant assessee had infact manufactured the final products out of the inputs on the basis of input-output ratio. As such, in the light of various decisions relied upon by the appellant, and in the absence of any concrete evidence of clandestine manufacture/removal of the goods, the impugned order is not sustainable. - Decided in favour of appellant

Summary

Issues: Alleged suppression of production and clandestine removal without payment of duty, applicability of extended period of limitation, reliance on Department of Scientific and Industrial Research (DSIR) report, burden of proof on the department, benefit of North East exemption.

Alleged Suppression of Production and Clandestine Removal without Payment of Duty:
The case involved M/s. Shillong Ispat & Rolling Mills (SIRM) being accused of suppressing production of dutiable goods and removing them clandestinely without paying duty. The Adjudicating Authority confirmed a demand of &8377;1,01,25,018/- along with interest and imposed a penalty. The appellant argued that there was no evidence to prove excess production or removal of goods without payment of duty. They contended that factors affecting production were not considered, and no anomalies were found during verification. The appellant also highlighted the legal principle that surmises and conjectures cannot determine duty liability. They emphasized that the Show Cause Notice was issued within the prescribed period and all facts were duly reported to the Central Excise authority.

Applicability of Extended Period of Limitation:
The appellant argued against the invocation of the extended period of limitation, stating there was no willful suppression of material facts. They contended that all necessary information had been regularly reported to the authorities as required. The appellant also highlighted their eligibility for duty exemption under the North East exemption Notification, suggesting no motive for evasion due to the revenue-neutral nature of duty payment under the exemption.

Reliance on Department of Scientific and Industrial Research (DSIR) Report:
The Revenue relied on a DSIR report to support their claim of suppression of production. The report indicated discrepancies in yield percentages, suggesting suppressed production by the appellant. However, the appellant challenged the report's evidential value, citing differences in technology and factors affecting production. They argued that the report did not consider the specific conditions of the appellant's unit, making it unreliable as evidence.

Burden of Proof on the Department:
The Revenue alleged that the appellant suppressed production records and engaged in clandestine removal of goods without paying duty. They claimed that the appellant manipulated records and did not maintain accurate production data. However, the Tribunal noted the absence of detailed reasoning and corroborative evidence to support these allegations. The onus to prove clandestine removal rested on the department, and mere input-output calculations were insufficient to establish the charges.

Benefit of North East Exemption:
The appellant, being a beneficiary of the North East exemption, argued that there was no logical reason for them to engage in clandestine activities when they were entitled to duty refunds under the exemption. They emphasized previous judgments supporting their position and highlighted the lack of concrete evidence of clandestine manufacture or removal. The Tribunal ultimately found the impugned order unsustainable due to the absence of evidence supporting the charges, and the appeal was allowed in favor of the appellant.