2017 (12) TMI 949 - AT - Central Excise

Clandestine removal - shortage of finished goods - whether the demand raised against the assessee are sustainable in the facts and circumstance of the case, on account of clandestine removal or not? - Held that - Admittedly, the SCN has been issued to the assessee on the basis of wastage as per SION norms and not on the actual basis. Further, during the course of investigation neither any discrepancy in the statutory records is found nor any shortage or excess of the goods were detected. In that circumstances, without any corroborative evidence, demands against the assessee are not sustainable - As the demands are not sustainable, penalties are also not imposable on the assessee and its partners - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of clandestine removal of finished goods.
2. Basis of demand on excess wastage as per SION norms.
3. Validity of corroborative evidence for demand.
4. Acceptance of specific demand by the assessee.
5. Imposition of penalties on the assessee and its partners.
6. Rate of duty applicable.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Removal of Finished Goods:
The core issue was whether the demand raised against the assessee was sustainable on the grounds of clandestine removal of finished goods. The investigation revealed no incriminating documents or discrepancies in the statutory records. The show cause notice was based on presumptions of excess wastage of fabrics, but no concrete evidence supported the allegation of clandestine removal. The Tribunal referenced previous judgments, such as Devender Sandhu Impex Limited Vs. CCE, Ludhiana, and Mahavir Metals Industries Vs. CCE, Daman, which established that mere assumptions and presumptions cannot justify the charge of clandestine removal.

2. Basis of Demand on Excess Wastage as per SION Norms:
The demand was based on the Standard Input-Output Norms (SION) rather than actual wastage figures. The Tribunal noted that the show cause notice relied on theoretical calculations rather than concrete evidence. It emphasized that without corroborative evidence, such demands are not sustainable, as highlighted in similar cases like Klene Paks Ltd. v. CCE, Bangalore-I.

3. Validity of Corroborative Evidence for Demand:
The Tribunal scrutinized the evidence presented and found it lacking. The case relied heavily on the statement of the Managing Director, which was retracted and unsupported by additional evidence such as records of electricity consumption, purchase of packing materials, or transportation details. The Tribunal cited the Hon’ble Gujarat High Court's decision in CCE v. Saakeen Alloys Pvt. Ltd., underscoring the necessity of positive evidence for establishing clandestine removal.

4. Acceptance of Specific Demand by the Assessee:
The assessee accepted a specific demand of ?49,437/- for short-found goods/rejected fabrics. This acceptance was not contested, and the Tribunal confirmed this demand along with interest.

5. Imposition of Penalties on the Assessee and its Partners:
Given the lack of substantial evidence to support the allegations of clandestine removal, the Tribunal found that penalties on the assessee and its partners were not justifiable. The dismissal of the main demand rendered the imposition of penalties unsustainable.

6. Rate of Duty Applicable:
The Revenue contended that the rate of duty applied by the Commissioner was incorrect. However, since the primary demand was dismissed, this issue became moot. The Tribunal did not find it necessary to address the rate of duty in detail.

Conclusion:
The Tribunal concluded that the demand based on the alleged clandestine removal was not sustainable due to the lack of concrete evidence. The appeal filed by the Revenue was dismissed, and penalties imposed on the assessee and its partners were set aside. The only confirmed demand was the uncontested amount of ?49,437/- along with interest. The judgment emphasized the necessity of corroborative evidence in cases of alleged clandestine removal, aligning with established legal precedents.