2018 (6) TMI 867 - AT - Central Excise

Clandestine Removal - electrical transformers - non-existence of corroborative evidences - Held that - It has nowhere been established by the Department that the electrical transformers supplied by the appellant to M/s AVVNL were non-duty paid and clandestinely removed - the appellant has not or the requisite capacity to manufacture the required number of electrical transformers for which they have got an order of supply from M/s AVVNL, Ajmer. For meeting the supply order, the appellant have been purchasing electrical transformers from M/s Rajasthan Transformers & Electricals, Jaipur who have been clearing the same on payment of appropriate central excise duty. For establishing a case of clandestine manufacture and clearance the Department need to be have proved that the appellant have been purchasing certain raw materials for manufacture of such a huge number of transformers which have been supplied by the appellant to M/s AVVNL without payment of duty - there are not enough evidences to prove the charges of the show cause notice. The supply of transformers made by the appellant were of duty paid electrical transformers received by them from M/s Rajasthan Transformers & Electricals, Jaipur and there is no evidence to prove that there has been any clandestine manufacture, clearance and thereby evasion of central excise duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allegation of clandestine clearance of electrical transformers without payment of duty.

Analysis:
The appellant, engaged in manufacturing electrical transformers, availed SSI exemption under Notification 8/2003. The Department alleged that the appellant clandestinely cleared electrical transformers without paying duty, resulting in a demand of central excise duty of ?98,35,496 along with a penalty. The evidence for this claim was based on a letter from AVVNL providing details of transformers supplied by the appellant.

The Tribunal noted that the appellant obtained a tender for transformers from AVVNL but lacked the capacity to manufacture them. They outsourced manufacturing to M/s Rajasthan Transformers & Electricals Ltd., affixing their brand plates on the transformers supplied. The appellant contended that all transformers supplied were purchased from M/s RTE, which had paid central excise duty. The Department's argument lacked evidence of non-duty paid transformers supplied to AVVNL.

The appellant submitted various documents to support their claim, including sale invoices, ledger accounts, and bank transactions, indicating the purchase of duty-paid transformers from M/s RTE. The Adjudicating Authority rejected these documents due to a lack of correlation between invoices. However, the Tribunal found credible evidence, such as transport vehicle details, supporting the appellant's claim of supplying duty-paid transformers.

The Tribunal emphasized the need for the Department to prove clandestine manufacture with concrete evidence, such as raw material purchases, power consumption, and waste production. The absence of such evidence led the Tribunal to rely on precedent, stating that the onus is on the Revenue to prove allegations of clandestine removal. Citing a previous Tribunal judgment and an Allahabad High Court decision, the Tribunal concluded that the appellant supplied duty-paid transformers and overturned the order-in-original, allowing the appeal.