2017 (7) TMI 452 - AT - Central Excise

Clandestine removal - shortage of inputs - the case was booked against the appellant of clandestine removal of goods on the basis of inspection conducted in their factory premises based on certain incriminating documents recovered during inspection and it was also alleged that the assessable value has been undervaluation by the appellants - Held that - the ld. Adjudicating Authority has not examined the issue of excisability - the adjudicating authority firstly is required to decide the issue of excisability of the product in question, therefore, the impugned order deserves no merits, accordingly, the same is set aside and the matter is remanded back to the adjudicating authority with the direction to first decide the issue of excisability of the product in question and thereafter, come to the issue of clandestine removal/undervaluation - appeal allowed by way of remand.

Summary

Issues:
Appeal against demand of duty due to clandestine removal, undervaluation, and shortage of inputs.

Analysis:
The appellants, engaged in manufacturing bulk drugs, faced a demand of duty due to clandestine removal, undervaluation, and shortage of inputs during stock taking. The solvents used in the manufacturing process were the subject of contention. The Revenue alleged that the appellants classified these solvents under the Central Excise Tariff Act, clearing them on payment of duty, leading to the charges of clandestine removal and undervaluation. The physical stock taking revealed shortages, prompting the denial of cenvat credit. The adjudication confirmed the charges, resulting in duty demand and penalties on the appellants.

The appellants argued that the solvents sold by them were not excisable, citing precedents like Aurobindo Pharma Ltd. and Sandoz Pvt. Ltd. They contended that the shortage of inputs, less than 0.5%, was minor as per the decision in Honda Motorcycle & Scooters India P. Ltd. The Revenue opposed, emphasizing the need for the adjudicating authority to first determine the excisability of the product before addressing clandestine removal and undervaluation issues.

After hearing the arguments, the Tribunal agreed that the issue of excisability needed determination first. Therefore, the impugned order was set aside, and the matter was remanded to the adjudicating authority to decide on the excisability of the product before addressing the issues of clandestine removal and undervaluation. Additionally, the adjudicating authority was directed to consider the decision in the Honda Motorcycles & Scooters India P. Ltd. case while deciding on the shortage of inputs. Consequently, the appeals were disposed of by way of remand for further proceedings.