2017 (12) TMI 382 - AT - Central Excise

Clandestine removal - appellant is clearing the goods to the parental unit without payment of duty as the goods are exported by the parental unit - As the parental unit did not mention the goods cleared against ARE-1 No.19 and 20 in the shipping bills, it was alleged that the goods covered under ARE-1 have been cleared clandestinely by the appellant without payment of duty - difference of opinion - majority order. Held that - the Revenue s allegations are that the goods in question stand clandestinely removed to the domestic market in which case the benefit of non-duty paid clearance for export cannot be extended. For making such allegations, the Revenue has not produced any evidence as to show and establish that the goods were diverted and as to how compensation for the same was received by the assessee - It is a matter of settled law that clandestine activities of any manufacturer, alleged by the Revenue, are required to be substantiated by production of tangible and positive evidences. The same cannot be made on the basis of assumptions and presumptions. Revenue, in the present case, has arrived at the above finding on the basis of surmises and conjunctures on the sole ground that ARE-1 Nos.19 & 20 were not mentioned in the shipping bills. It is seen that the appellant had produced evidences on the record to show that the said goods cleared under the said ARE-1 were duly reflected in the invoices issued by the parent Unit for export, though the same were not mentioned in the shipping bills. The order of learned Member (Technical) is indeed on the procedural technical violations and does not conclude on the basis of any evidences. Admittedly, a particular act is required to be done in a particular manner as provided under the statute but an inadvertent mistake to follow the procedural aspect cannot be adopted for arriving at the conclusions against the assessee. It has to be kept in mind that it is the Revenue which is alleging clandestine removal and as such, the onus to prove the same lies heavily upon them. Admittedly, Revenue has not been able to produce any evidences to that effect - the inadvertent mistake of non-mentioning of ARE-1 Nos. 19 & 20 in the shipping bills cannot lead to any adverse conclusion against the assessee, especially, when such exports stand established by other parallel documents. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Clandestine removal of goods.
2. Procedural lapses in export documentation.
3. Imposition of duty and penalty.

Issue-wise Detailed Analysis:

1. Clandestine Removal of Goods:
The appellant was accused of clandestine removal of aluminum fence fittings without payment of duty. The goods were cleared under ARE-1 certificates for export by the parental unit but were not mentioned in the shipping bills. The appellant argued that this was an inadvertent mistake by the parental unit and that the goods were indeed exported. The Tribunal found that the Revenue failed to produce any evidence showing that the goods were diverted to the domestic market. The Tribunal concluded that the charge of clandestine removal was not sustainable as there was no tangible proof from the Revenue.

2. Procedural Lapses in Export Documentation:
The appellant's parental unit did not mention ARE-1 Nos. 19 and 20 in the shipping bills, which led to the Revenue's allegation. The appellant contended that the goods were exported and that the omission was a procedural mistake. The Tribunal noted that the Superintendent of Customs had signed the ARE-1 forms, indicating that the goods were examined before export. The Tribunal found that the procedural lapse did not substantiate the charge of clandestine removal. However, a penalty of ?5,000 was imposed for the procedural mistake under Rule 27 of the Central Excise Rules, 2002.

3. Imposition of Duty and Penalty:
The initial order demanded duty along with interest and imposed a penalty on the appellant. The Tribunal set aside the demand for duty and the penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. The Tribunal held that the inadvertent mistake did not justify the imposition of duty and penalty, as the goods were exported and not diverted to the domestic market. The penalty of ?5,000 under Rule 27 was confirmed due to the procedural lapse.

Separate Judgments:
The judgment included a dissenting opinion by one of the members, who believed that the appellant failed to substantiate their claim of export due to the absence of required customs certification on the ARE-1 forms. This member argued that the procedural requirements were mandatory and that the goods were not proven to be exported. However, the majority opinion, which set aside the demand for duty and penalty, prevailed.

Majority Decision:
The majority decision concluded that the impugned order should be set aside, and the appeal was allowed with consequential relief. The Tribunal emphasized that the Revenue did not provide sufficient evidence to prove clandestine removal and that procedural lapses alone were not enough to sustain the charges.

Final Order:
The impugned order was set aside, and the appeal was allowed, with the penalty of ?5,000 under Rule 27 being confirmed for the procedural lapse. The order was pronounced in open court on 04.12.2017.

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