2018 (12) TMI 489 - AT - Central Excise

Clandestine removal - shortage of finished goods and raw material - shortage mainly due to normal loss like evaporation - Held that - There is no evidence brought on record that on account of such shortage, the goods have been cleared clandestinely - The manager of appellant company, Shri. Anand Kumar Singh, also clearly stated that the shortage is not due to clandestine removal in his statement. He explained that due to nature of product there is a spillage and evaporaion at different stage of manufacturing. Therefore, this shortage is for a long period of production, the explanation given by the manager in his statement appears to be convincing. Since, there is no evidence of clandestine removal, a demand is not sustainable - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Shortage of finished goods and raw material leading to demand of duty, appeal before Commissioner (Appeals) upholding the original order, contention of shortage due to accounting mistake and worker mishandling, reliance on various judgments, Revenue's argument of admitted shortage during physical stock taking, lack of evidence of clandestine removal, comparison with previous Tribunal judgment.

Analysis:
The case involved a situation where Central Excise Officers found a shortage of finished goods and raw material during a physical verification at the appellant's factory, leading to a demand of duty confirmed through an adjudication order. The appeal before the Commissioner (Appeals) resulted in upholding the original order, prompting the present appeal. The appellant's counsel argued that the shortage was due to accounting errors and mishandling by workers, citing spillage and evaporation inherent in the production process of petroleum products. The manager's statement clarified that the shortage was not due to clandestine removal, emphasizing the nature of the goods and the long period over which the shortage occurred. The appellant relied on various judgments to support their case.

The Revenue, represented by the Superintendent, reiterated that the shortage was admitted during physical stock taking, justifying the demand for duty on the shortage. However, upon careful consideration of submissions and records, the Tribunal found no evidence linking the shortage to clandestine removal. The manager's statement, supported by the nature of the product and the explanation provided, convinced the Tribunal that the shortage was a result of spillage and evaporation over an extended production period. Citing a previous Tribunal judgment in a similar case, the Tribunal emphasized the need for corroborating evidence to confirm allegations of clandestine removal.

Ultimately, the Tribunal set aside the impugned order, allowing the appeals based on the lack of evidence supporting clandestine removal and the convincing explanation provided for the shortage. The comparison with the previous judgment highlighted the applicability of the principles established therein, leading to the favorable decision for the appellant.