2017 (12) TMI 440 - AT - Central Excise

Validity of SCN - whether show cause notice have been rightly issued on presumption of removal of scrap without payment of duty? - Held that - no case of clandestine removal is made out in the show cause notice. The whole show cause notice is presumptive - the SCN is not maintainable - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Whether show cause notice rightly issued on presumption of removal of scrap without payment of duty.

Analysis:
The appeal revolved around the issuance of a show cause notice concerning the removal of scrap without duty payment. The appellant was accused of clandestinely removing scrap without paying duty, leading to a significant discrepancy in input-output ratio. The show cause notice detailed the alleged evasion of Cenvat duty, highlighting the absence of reflection of the 14% scrap in records. The appellant contended that they believed duty was only applicable to finished or semi-finished goods, not scrap. Subsequently, they deposited a portion of the duty upon realizing their misunderstanding. The notice also mentioned discrepancies in scrap generation calculations, implying an intent to evade duty. The appellant was required to justify why a substantial amount should not be recovered from them, inclusive of interest and penalties.

The adjudication of the show cause notice resulted in the confirmation of the proposed demand with interest, accompanied by penalties under relevant sections. The appellant contested this decision before the Commissioner (Appeals), who largely upheld the original order, except for setting aside one penalty. Dissatisfied, the appellant approached the Tribunal seeking relief.

Upon hearing both parties, the Tribunal concluded that the show cause notice lacked substantial evidence of clandestine removal, deeming it presumptive. Consequently, the Tribunal found the notice unsustainable and allowed the appeal, setting aside the impugned order. The judgment emphasized the necessity of concrete evidence in cases of duty evasion, highlighting the insufficiency of presumptive allegations without factual basis.