2019 (1) TMI 1026 - AT - Central Excise

Clandestine manufacture and removal - shortage of finished goods - proper accounting of goods received from job-workers not done - clandestine manufacture on Sundays - Excisable goods were lying in the sister concern without obtaining any permission and without payment of duty - Held that - The officers have noticed that there is a shortage on the basis of the weight written on the rolls. On this basis, they concluded that whereas as per RG-1, stock could have been 24,039 Kg and actual stock was 11,270 Kg. The appellant s contention was that the shortage arrived on the basis of estimation is not acceptable and that the stock as per RG-1 has been cleared subsequently on payment of duty and on valid invoices. We find that the appellant s contention is acceptable for two reasons one being that the entire stock of 24,039 Kg has been accounted in the clearance subsequently. Therefore, there is no reason to demand duty again on the stock alleged to have found short - Moreover, as held in a catena of judgment clandestine removal cannot be alleged merely on the basis of shortage found - other than alleging that the goods were found shortage, the Revenue has not produced any evidence to show that the goods have been clandestinely manufactured and cleared. There is no evidence to the effect of purchase of raw-material, consumption of electricity, wages to labour, production, clearance, transportation of sale proceeds etc which could have been used to prove the alleged clandestine removal are not forthcoming. Therefore, this allegation is not substantiated. Non-accountal of goods received from job-worker - Held that - The appellant s contention regarding receipt of captive consumption do not appear to be a valid at least as far as the goods received from the job-workers are concerned. If it was the case of the appellant that the entire quantity is accounted for in RG-1, the contentions of no evidence being available for evidencing clandestine removal would have been acceptable - In the absence of the same, we find that the appellants are required to discharge duty on this difference quantity. Non-accountal of production and clearance on Sundays or certain dates - Held that - The ownership and the authenticity of the notebook/record are not established. The appellants contended that the names mentioned therein are not the employees as can be verified by their master or the record submitted to ESIC. Moreover, we find that the Department has not come forth with any further proof of clandestine removal. It was also submitted that the register alleged to have been maintained at the security gate showing transportation of the goods maintained by one Shri. Kannan, Security In-charge. As per the show-cause notice itself said Shri. Kannan could not be traced and therefore the investigation mechanism incomplete and inconclusive. Such being the averments in the show-cause notice, we fail to understand as to how the Department has concluded the allegation on the appellants - contention of Department cannot be established. Seizure of 1.60 MT of finished goods in the adjoining premises of M/s. Deepak Filaments - Held that - It is not coming forth from the case records whether the same was accounted for in RG-1. There is no allegation by the Department that the same is removed without payment of duty. However there is certainly a procedural infraction. There was no reason as to what stopped the appellant from informing the authorities and obtaining the due permission. In such circumstances, Department in its right to seize such material and order for confiscation - while upholding confiscation, the quantum of redemption fine is reduced. Penalty on Shri. Dhiraj Sipani, partner of the appellant - Held that - Keeping in view the fact that he was the partner of the company and was present during the proceedings of mahazar. In all certainty as a partner he could have been in a better position to explain the working of the factory then Shri. Ravi Kumar. Moreover, without recording the statement of Shri. Dhiraj Sipani, the Department has proceeded to impose penalty on him - penalty do not sustain. Matter remanded back to the original adjudicating authority to quantify the duty applicable on 18,221.70 Kg of goods which were not received back from the job-workers after processing and penalty on the same would be equal to the said duty calculated in terms of Section 11AC of the Central Excise Act, 1944 - appeal allowed in part.

Issues Involved:
1. Alleged shortage of 12,769 Kg of HDPE fabric.
2. Non-accounting of goods received from job-workers.
3. Alleged clandestine manufacture and clearance on Sundays.
4. Seizure of 1.60 MT of finished goods stored in a sister concern’s premises without permission.

Detailed Analysis:

1. Alleged shortage of 12,769 Kg of HDPE fabric:
The Revenue alleged a shortage of 12,769 Kg of HDPE fabric based on the weight written on the rolls. The appellants contended that the shortage was estimated and that the stock as per RG-1 had been cleared subsequently on payment of duty. The Tribunal found the appellant's contention acceptable, noting that the entire stock of 24,039 Kg had been accounted for in subsequent clearances. The Tribunal held that clandestine removal could not be alleged merely on the basis of a shortage found, citing the case of Daya Sugar, which emphasized the need for concrete evidence beyond mere estimations. Therefore, the allegation of a shortage was not substantiated.

2. Non-accounting of goods received from job-workers:
The Revenue demanded duty on 18,221.70 Kg of goods allegedly not accounted for after being received from job-workers. The appellants argued that part of this quantity was defective or captively consumed. The Tribunal found that the appellants failed to provide proof for the unaccounted quantity. Hence, the appellants were required to discharge duty on this difference.

3. Alleged clandestine manufacture and clearance on Sundays:
The Revenue alleged that production and clearance occurred on Sundays based on an unauthenticated handwritten notebook. The appellants argued that not all dates mentioned were Sundays and that the notebook was not authenticated or corroborated by any other evidence. The Tribunal found the Department's investigation incomplete and inconclusive, noting that the authenticity of the notebook was not established, and no further proof of clandestine removal was provided. Therefore, this allegation was not substantiated.

4. Seizure of 1.60 MT of finished goods stored in a sister concern’s premises without permission:
The appellants admitted to storing goods in a sister concern’s premises due to a lack of space but argued that this was a procedural infraction. The Tribunal found that while the goods were accounted for, the appellants failed to obtain the necessary permission. The Tribunal upheld the confiscation but reduced the redemption fine from ?1,00,000 to ?5,000, deeming the initial fine excessive.

Penalty on Shri. Dhiraj Sipani:
The Tribunal found that no statement from Shri. Dhiraj Sipani was recorded during the investigation. The penalty imposed on him was based on the statement of another individual, which was retracted. The Tribunal held that without direct evidence or a statement from Shri. Sipani, the penalty was not sustainable and set it aside.

Conclusion:
The Tribunal concluded that the Department failed to substantiate the allegations of clandestine removal with concrete evidence. The demand for duty on the unaccounted quantity of 18,221.70 Kg of processed goods was upheld, and the case was remanded to the original adjudicating authority for duty quantification. The redemption fine was reduced, and the penalty on Shri. Dhiraj Sipani was set aside. The appeal was partly allowed and remanded for further quantification of duty and penalties.

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