2018 (4) TMI 1231 - AT - Central Excise

Clandestine removal - shortage of raw material - CENVAT credit on Billets - Held that - as the due date for payment was not yet to come, the allegation of clandestine removal of goods on these invoices is not substantiated and accordingly the demand of ₹ 3,36,510/- is set aside. The admitted fact is that the appellant had deposited the amount of ₹ 13,46,036/- before the issue of Show Cause Notice ( ) further ₹ 3,17,381/- towards penalty and further ₹ 24,000/- towards interest - the appellant is entitled to concessional rate of penalty of 25% of ₹ 7,49,210/-, charged under the provisions of Section 11AC(1)(c) of the Act. Appeal allowed in part.

Summary

Issues:
1. Shortage of raw materials and clandestine clearance of goods.
2. Allegation of clandestine removal of goods based on parallel invoices.
3. Demand based on loose papers for production planning.

Analysis:
1. The appellant, a registered dealer with the Central Excise Department, appealed against an Order-in-Appeal confirming a duty of ?13,46,036/- along with an equal penalty. The appellant was charged with shortages of raw materials and clandestine clearance of goods. The Department found discrepancies during a search, including shortages of raw materials and unrecorded clearances of finished goods. The appellant contested the Show Cause Notice, arguing that clearances were not clandestine and that invoices were issued properly. The Tribunal found that the appellant was entitled to set off the Cenvat credit on raw materials and set aside the demand related to certain invoices as the due date for duty payment had not arrived. The Tribunal upheld a reduced demand and penalty based on the remaining discrepancies.

2. Regarding the demand based on parallel invoices, the appellant argued that no goods were dispatched as the orders were canceled, and there was no evidence of production and removal of goods. The Tribunal found the allegation of clandestine removal unsupported due to the lack of corroborative evidence, setting aside this part of the demand.

3. The demand based on loose papers for production planning was also contested by the appellant, claiming that the papers were for planning purposes only and not indicative of actual production and sale. The Tribunal agreed that without evidence of actual production and removal, this demand could not be sustained and set it aside. The Tribunal allowed the appeal in part, granting relief to the appellant in accordance with the law.