2018 (2) TMI 394 - AT - Central Excise

Penalty - clandestine removal - shortage of finished goods - Held that - the entire charge of clandestine removal of goods is based on labour attendance register. The Central Excise officers searched the factory premises and could not find any other corroborative evidence to link the said labour attendance register to alleged clandestine removal of goods. In my considered view, the charge of clandestine removal of goods cannot be sustained merely on the basis of labour attendance register, which is uncorroborative in nature. The Tribunal, in the case of Golden Steel Corporation Ltd. v. CCE, Kolkata-II 2016 (10) TMI 567 - CESTAT KOLKATA , observed that the clandestine removal of goods is a serious charge and cannot be held on the basis of presumption, assumption and surmises. In that case, the demand was raised on daily performance report of HR strips prepared by quality control incharge of the assessee recovered from its factory. The Tribunal set aside the demand. There is no material available on record of clandestine removal of the shortage material and the imposition of penalty under section 11AC of the Central Excise Act, 1944 is not warranted. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against Order-in-Appeal No.70/CE/BBSR-I/2015 dated 22.01.2016
- Alleged clandestine removal of goods based on private register document no. 18
- Confirmation of demand of duty, interest, and penalties
- Discrepancies between private register and RG-1 register
- Lack of corroborative evidence for clandestine removal charge
- Retraction of statement by production manager
- Shortage of goods during joint stock verification
- Imposition of penalty under section 11AC of the Central Excise Act, 1944

Analysis:

The appeals were filed against the Order-in-Appeal No.70/CE/BBSR-I/2015 dated 22.01.2016, where the appellants were accused of clandestine removal of goods based on a private register document no. 18 recovered during a search operation. The Central Excise officers found discrepancies between the figures in the private register and the RG-1 register, leading to the imposition of penalties and demands of duty. The Adjudicating Authority confirmed the demand of duty, interest, and penalties, which was upheld by the Commissioner (Appeals), prompting the appellants to file appeals.

The main contention of the appellants was that the private register document no. 18 was a labor attendance register, not reflective of actual production figures. The Commissioner (Appeals) relied on statements by the sheet-in-charge and the lack of retraction to support the charge of clandestine removal. However, the Tribunal emphasized the need for corroborative evidence, citing a previous case where demands were set aside due to insufficient proof. The appellant's production manager retracted his statement, further weakening the case against clandestine removal solely based on the private register.

Upon analysis, it was found that the charge of clandestine removal of goods solely based on the labor attendance register was not sustainable without corroborative evidence. The lack of attempts to verify the register with other evidence and the retraction of a key statement undermined the case. Additionally, the shortage of goods detected during joint stock verification did not have evidence of clandestine removal, leading to the modification of the impugned order to uphold the demand of duty on the shortage but set aside the rest of the penalties and charges.

In conclusion, the appeals were disposed of with modifications to the impugned order, emphasizing the need for substantial corroborative evidence in cases of alleged clandestine removal of goods and the importance of retracting statements in legal proceedings.