2017 (11) TMI 1096 - AT - Central Excise

Clandestine removal - M.S. ingots - Held that - both the lower authorities have not adduced any evidence to show that M/s J.S. Forge Pvt. Ltd. in fact, had received the 205 MTs of sponge iron purportedly cleared by M/s Shilphy Steel Pvt. Ltd., clandestinely, nor there is any evidence to show that the said sponge iron cleared by M/s Shilphy Steel Pvt. Ltd. was converted to MS ingots by the appellant in any form - In absence of any evidence to show that, there was conversion of sponge iron purportedly cleared clandestinely by M/s Shilphy Steel Pvt. Ltd., demand of duty from the appellant M/s J.S. Forge Pvt. Ltd. for clandestine clearance of finished goods, may not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of Central Excise duty on clandestine clearances of finished goods.
2. Lack of evidence to prove conversion of raw materials.
3. Applicability of precedent in similar cases.

Analysis:
1. The judgment revolves around the demand of Central Excise duty on clandestine clearances of finished goods, specifically M.S. ingots, by the main appellant. The investigation was based on a show cause notice issued to the main appellant for allegedly receiving sponge iron clandestinely from another company and converting it to M.S. ingots without payment of duty. Both lower authorities confirmed a demand of &8377; 3,31,703/- along with penalties. However, upon review, it was found that there was no concrete evidence to prove that the main appellant had received the sponge iron or converted it to M.S. ingots for clandestine clearances.

2. The judgment highlights the lack of evidence regarding the conversion of raw materials by the main appellant. It was noted that neither the authorities nor the investigation provided any proof that the sponge iron received clandestinely was indeed converted into M.S. ingots by the main appellant. The absence of such evidence raised doubts regarding the validity of the demand for duty on the alleged clandestine clearances. The judgment emphasized the importance of corroborative evidence in cases of clandestine activities to substantiate allegations and demands.

3. The judgment referenced a precedent involving a similar set of facts and investigations initiated by DGCEI authorities against another company. The precedent case emphasized the significance of corroboration and additional evidence beyond mere admission statements in cases involving clandestine activities. The judgment concluded that the ratio from the precedent case was directly applicable to the current situation, leading to the acceptance of the appeals and setting aside of the impugned order. This analysis underscores the importance of legal precedents and the application of established principles in determining the outcomes of similar cases.