2019 (2) TMI 932 - AT - Central Excise

Clandestine removal - Cold Rolled products in various forms like Coils/Shets/Strips and Plain/Corrugated Galvanized Sheets - Revenue s entire case is based upon the factum of purchase of raw material at Chandigarh Depot and the allegation that the same was subsequently transfered to the respondent s Sahibabad factory who utilized the same for manufacture of their final product removed clandestinely back to their Chandigarh Depot from where the same was sold to various parties. Held that - Admittedly the raw material purchased at Chandigarh depot was reflected in their account book and as rightly held the same could not be sold in an unaccounted manner. Even though the Revenue has contested that the transactions at Chandigarh were with the related parties of assessee but none of those related parties have been made a party to the proceedings. Apart from the bare allegations, there is not even an iota of evidence to show as to how such huge quantity of raw material was transported from Chandigarh to Sahibabad and as to how the final product allegedly manufactured at Sahibabad were transported to Chandigarh in a clandestine manner. Apart from the fact that the Revenue has not produced any evidence to show engagement of such a huge number of trucks by the assessee, we also note that at no point of time even a single truck was ever intercepted by the Revenue. Further, during the relevant period the entry of goods in the State of Uttar Pradesh was to be accompanied with Form 31 issued by the Sales Tax Department and the goods were physically checked at the entry points of State - There being no evidences to that effect the allegations of clandestine manufacture and removal cannot be upheld and have been rightly dropped by the Adjudicating Authority. Appeal dismissed - decided against Revenue.

Summary

Issues: Alleged evasion of Central Excise duty through clandestine removal and under-valuation by a manufacturing company.

Analysis:
1. The case involved allegations of evasion of Central Excise duty by a manufacturing company engaged in the production of Cold Rolled products. The company was accused of clandestinely removing finished goods without payment of duty. The investigation was initiated based on intelligence indicating possible duty evasion.

2. The Directorate General of Central Excise Intelligence (DGCEI) conducted searches and seized documents from the factory premises. It was alleged that the company procured raw materials from group companies, transferred them to their factory for production, and then removed the finished goods without paying duty. The company was also accused of falsely presenting the goods as part of trading activities.

3. The show cause notice alleged that the company evaded Central Excise duty amounting to a substantial sum during a specific period. The notice invoked penal provisions against the company for willful suppression of facts and contravention of Central Excise Rules. The extended period of five years was invoked for investigation.

4. The company denied the allegations of duty evasion and defended its actions in written and oral submissions during the proceedings. The adjudicating authority carefully examined the case records, evidence, and submissions before passing the Order-in-Original.

5. The adjudicating authority found that the Revenue failed to provide material evidence to substantiate the allegations of clandestine removal and evasion of duty. The authority noted discrepancies in the Revenue's case, including lack of evidence regarding the transportation of raw materials and finished goods between different locations.

6. The adjudicating authority concluded that in the absence of positive evidence and proof of willful suppression, the charges of clandestine manufacture and removal were not sustainable. The authority held that the demand was barred by limitation and dropped the proceedings against the company based on merit and limitation.

7. Upon appeal by the Revenue, the Appellate Tribunal upheld the adjudicating authority's decision. The Tribunal noted the lack of evidence supporting the Revenue's case, including the absence of proof regarding transportation logistics and the identification of buyers for the allegedly clandestinely removed goods. The Tribunal rejected the Revenue's appeal, affirming the adjudicating authority's findings.

This detailed analysis highlights the key legal issues, investigative process, findings of the adjudicating authority, and the Tribunal's decision in the case of alleged Central Excise duty evasion by the manufacturing company.