2019 (4) TMI 639 - AT - Central Excise

Clandestine removal - Shortage of raw material and finished goods - no verification at the buyer/supplier s end conducted by the Revenue - whether the department was right in fastening the duty on account of shortage of the finished goods, and raw material found during the joint stock verification? - Held that - It was presumed by the department that since the authorised representative and the Director of the noticee have accepted the shortage and also made voluntary payment the clandestine removal is accepted by them and hence no further proof is required to that effect. Ld. AR has relied upon the various decisions, wherein it has been held that once the shortage is accepted, no further proof is required for the clandestine removal of the goods. But we feel that the same cannot be applied in the facts and circumstances of present case because the assessee is never accepted the shortage as claimed by the Revenue but paid the Central Excise duty to avoid further litigation and coercion. The department has not conducted any verification at the buyer/supplier s end in spite of having complete address with them. The Hon ble Tribunal in the case of Central Cables Ltd. Vs. CCE, Nagpur 2011 (1) TMI 1011 - CESTAT, MUMBAI held that stock taking by Revenue officers not considering inputs for manufacture and clearance not entered in statutory records before the stock taking. In this case, though the assessee failed to explain the shortage during the visit of Revenue officers, but they did not admit the same and submitted all information along with reconciliation statement. In absence of corroborative evidence, allegation of clandestine removal was not sustainable assessee was only liable for non-maintenance of statutory record. The allegation of clandestine removal is very serious charge and required to be proved with a tangible evidence and supported by corroborative facts - in the present case, Revenue has failed to conduct the investigation in a full proof manner so as to sustain charge against appellant. Demand not sustainable - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of clandestine removal of finished goods and inputs.
2. Adequacy of evidence for clandestine removal.
3. Procedural flaws in stock verification and investigation.
4. Misinterpretation of statements by key personnel.
5. Failure to consider relevant case laws and precedents.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Removal of Finished Goods and Inputs:
The core issue in the case revolves around the allegation that the appellant was involved in the clandestine removal of finished goods and inputs without proper discharge of Central Excise duty. The Preventive Wing of Durgapur, Central Excise Division, conducted a stock verification on 30.1.2012 and found discrepancies between the physical stock and the records maintained by the appellant. The daily stock account reflected an opening balance of 1948.045 MT of MS billets, but the physical stock was found to be NIL. Similar shortages were noticed in raw materials like pig iron, MS billet, and sponge iron.

2. Adequacy of Evidence for Clandestine Removal:
The appellant argued that there was no concrete evidence to support the allegation of clandestine removal. The department did not provide any evidence regarding the transportation of the alleged clandestinely removed goods, nor did they conduct any inquiry at the buyers' end to ascertain the receipt of goods without payment of duty. The appellant emphasized that the burden of proof lies with the department, which failed to provide positive and tangible evidence to substantiate the charge.

3. Procedural Flaws in Stock Verification and Investigation:
The appellant contended that the joint stock verification was not conducted appropriately. They argued that the physical shortage could be due to various reasons such as stock lying in the furnace, at the TMT shop floor, or in the slags scattered in the manufacturing plant. The stock entry was based on eye estimation, leading to possible variations. The appellant also pointed out that the weighment slips indicated arbitrary and illegal weighment, as the gross amount per truck exceeded the usual capacity.

4. Misinterpretation of Statements by Key Personnel:
The statements of key personnel, including the Commercial Manager and the Director, were recorded during the investigation. While they admitted the shortage, they did not accept the clandestine removal of goods. The Director explained that the shortage could be due to various factors and that the joint stock verification did not consider the entire stock appropriately. The appellant argued that the adjudicating authority misinterpreted these statements to conclude clandestine removal.

5. Failure to Consider Relevant Case Laws and Precedents:
The appellant submitted several case laws to support their claim that no clandestine removal occurred. They argued that the adjudicating authority failed to consider these decisions. The cited cases emphasized that allegations of clandestine removal must be supported by concrete evidence, and mere shortages in stock do not suffice to prove clandestine removal. The appellant highlighted decisions like Nissan Thermoware Pvt. Ltd. Vs. CCE and Sakeen Alloys Pvt. Ltd. Vs. CCE, which supported their stance.

Conclusion:
The Tribunal concluded that the department failed to provide sufficient evidence to substantiate the charge of clandestine removal. The shortage of finished goods and raw materials alone was not enough to prove clandestine removal without corroborative evidence. The Tribunal referred to various case laws that supported the appellant's argument. Consequently, the impugned order was set aside, and the appeal was allowed. The appellant was entitled to consequential benefits as per law.

← Previous Next →