2018 (11) TMI 1206 - AT - Central Excise

Clandestine removal - Transfer of inputs (imported goods) without reversing SAD Credit - shortage of raw materials/ packaging material - revenue neutrality - Held that - The inputs were removed from appellants one unit to their own another unit and the recipient unit is entitled for the Cenvat Credit, in this fact the entire exercise is Revenue/appellant neutral. Their cannot be any malafide intention to remove the input without reversing the SAD as there is neither any gain nor loss to the Revenue in reversing the credit - being the case clearly of Revenue neutral the demand is not sustainable. Shortage of raw material and packing material - demand is mainly based on the statement of Sh. Sameer Parekh dated 05.02.2010 - Held that - Though in the statement Sh. Sameer Parekh admitted the shortage however he immediately after five days by affidavit retracted his statement dated 05.02.2010. He explained the reason of shortage - The statements recorded of some transporter do not reveal the actual co-relation of alleged clandestine removal - also, there is force in the submission of the appellant that the shortage is only minimum to the extent of 0.5% whereas in the type of industry of appellant the difference of 3% to 5% of shortage is possible - demand cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
a) Transfer of imported goods without reversing proportionate credit of SAD
b) Shortage of raw materials/packaging material and alleged clandestine removal

Analysis:

Issue a) Transfer of imported goods without reversing proportionate credit of SAD:
The appellant transferred imported goods to their Taloja Factory without reversing the credit of SAD, leading to a demand of ?3,07,140. The appellant argued that since the recipient unit was entitled to Cenvat Credit, the transfer was revenue-neutral. The tribunal agreed, noting that there was no malafide intention as there was no gain or loss to the Revenue. Consequently, the demand was deemed unsustainable.

Issue b) Shortage of raw materials/packaging material and alleged clandestine removal:
A physical verification revealed a shortage of raw materials/packaging material, resulting in a demand of ?13,90,462 and a penalty. The adjudicating authority relied on a statement by the Director, who later retracted it, citing technical glitches in the ERP system. The tribunal found the ERP system unreliable for stock maintenance, rendering the shortage claim unsubstantiated. The statements of transporters lacked correlation with clandestine removal, and the lack of examination under Section 9D of the Central Excise Act weakened their evidentiary value. The tribunal concluded that the shortage, if any, was minimal (0.5%) and within the industry norm of 3-5%. As a result, the demand was deemed unsustainable, and the appeal was allowed with consequential relief.

In conclusion, the tribunal set aside the impugned order, ruling in favor of the appellant on both issues. The judgment highlighted the importance of reliable evidence and adherence to procedural requirements in establishing claims of duty evasion or shortages.