2018 (8) TMI 476 - AT - Central Excise

Clandestine removal - shortages and excesses of goods - Held that - The entire case of the Revenue is based upon the shortages detected in Unit No.1 and the excesses found in Unit No.2, 3 & 4. Whereas the Revenue has considered the shortages in Unit No.1 as clandestine clearance, the excesses found in the other units stand confiscated along with imposition of penalties - shortages by themselves, without there being any corroborative evidence cannot lead to the finding of clandestine removal. Apart from the shortages, Revenue has not referred to any other evidence on record to indicate or to establish that the short found goods stand cleared by Unit No.1 without payment of duty - the findings of clandestine removal against the said Unit are unsustainable. The shortages found in Unit No.1 were almost equal to the goods seized in Unit No.2, 3 & 4. The Revenue has confiscated the excess found goods in Unit No.2, 3 & 4 even though the said units were not registered with the Department and there was no requirement for their registration inasmuch as they were doing the job work for Unit No.1 and was not manufacturing any final product - No justification for confiscation of the said excess found goods in their premises, which are nothing but the shortages detected in the Unit No. 1. The confiscation of the same and imposition of penalties on the said units are set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegations of clandestine removal against Unit No.1
2. Confiscation of excess goods in Unit No.2, 3 & 4
3. Imposition of penalties on various units and individuals
4. Legal validity of the actions taken by the Revenue

Analysis:

1. The case involved allegations of clandestine removal against Unit No.1, a Ready Made Garments factory. The Revenue claimed shortages in Unit No.1 as evidence of clandestine clearance. However, the Tribunal noted that mere shortages without corroborative evidence cannot establish clandestine removal. Citing precedent decisions, it was held that shortages alone are insufficient to prove clandestine removal without further investigation to identify buyers or suppliers. The Tribunal found the Revenue's findings against Unit No.1 unsustainable due to lack of additional evidence beyond the shortages.

2. The Revenue had confiscated excess goods found in Unit No.2, 3 & 4, alleging clearance without duty payment. However, the appellant argued that these units were engaged in job work for Unit No.1 and were not required to be registered due to low clearances falling under exemption limits for small scale industries. The Tribunal agreed with the appellant, stating that the excess goods confiscated were actually the shortages detected in Unit No.1. Consequently, the confiscation of excess goods and penalties imposed on these units were deemed unjustified and set aside.

3. Penalties were imposed on Unit No.2, 3 & 4, as well as on an individual associated with the company. The Tribunal ruled in favor of the appellants, finding no legal basis for the penalties imposed in light of the unjustified confiscation of goods and lack of evidence supporting clandestine removal allegations. Therefore, the penalties imposed on the units and the individual were set aside.

4. In conclusion, the Tribunal set aside the impugned orders and allowed all four appeals filed by the appellants. The judgment emphasized the importance of proper evidence and investigation to support allegations of clandestine removal and highlighted the necessity of following legal procedures, especially in cases involving multiple units and complex manufacturing processes.