2019 (4) TMI 650 - AT - Central Excise

Clandestine removal - undervaluation of finished goods by the appellant sold through M/s JBCPL and M/s MBSC - shortage of finished goods during the stock taking at the factory premises - irregular Cenvat credit on the basis of four supplier of the scrap without accompanying of the goods - no cross-examination allowed - Held that - The demand of ₹ 40,76,894/- has been confirmed on the basis of certain loose slips/ pages relied upon by the Revenue which were resumed from Shri Raman Bhatia, Director of M/s JBCPL, who was the consignment agent. No reliance can be placed on these loose sheets as the name of the appellant is not mentioned in the said loose sheets. Reliance cannot be placed on the statements of Shri Raman Bhatia without cross examination. M/s JBCPL was selling the identical goods on behalf of the other manufacturer as a dealer. No statements have been recorded from alleged buyer of finished goods, whose name appeared on these loose sheets. Hence, there is no corroboration for the authenticity of loose sheets or averment of Shri Raman Bhatia - also, the adjudicating authority has not followed the procedure as prescribed under Section 9D of the Central Excise Act for placing reliance on the various statements recorded from the various persons, who were either the consignment agent/dealers/supplier of the goods. It is also stated earlier that no reliance can be placed on the third party evidence, without independent corroboration as has been done by the adjudicating authority. CENVAT Credit - Held that - Although names of the various supplier of these inputs/raw materials were available with the investigators, however, they have not been examined and merely the credit have been denied to the appellant - no statements or any transporter to prove the scrap was loaded from any other premises then supplier of the goods during Alka Creations. Demand in respect of supply made by the appellant to M/s MBSC during the period from Jan. 2011 to October 2011 - case of the Revenue was that there is under valuation to the extent of ₹ 5/- to 10/- for SS flats in respect of sales to M/s MBSC by five years - Held that - No sufficient corroborative evidence was brought on record to prove this charge by the Revenue. Though, the statements were recorded from Managing Director, he was not questioned about the valuation with regard to clearance to M/s MBSC. This duty demand was solely based on some records seized from the premises of M/s MBSC which showed entries merely and some found during search - The department failed to rebut or controverted the various findings as recorded by ld. Adjudicating authority in the impugned order and therefore same is required to be upheld. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Undervaluation of finished goods sold through consignment agents.
2. Shortage of finished goods during stock taking.
3. Irregular availment of Cenvat credit.
4. Penalty imposition on individuals and entities.
5. Departmental appeal against dropping of demand.

Detailed Analysis:

1. Undervaluation of Finished Goods:
The department alleged that the appellant collected amounts over and above the invoice value in cash from buyers through their consignment agents, M/s Jai Bhawani Concast Pvt. Ltd. (JBCPL) and M/s Maa Beri Steel Co. (MBSC). The demand of ?40,76,894/- was confirmed based on loose slips and statements from Shri Raman Bhatia, Director of JBCPL. The tribunal found that these loose sheets did not mention the appellant's name and no corroborative evidence was provided. Reliance on third-party documents without independent corroboration was deemed improper, referencing several case laws including "Modern Agency & Ors. Vs. Commissioner of Customs and Ors." and "Jindal Drugs Vs. Union of India."

2. Shortage of Finished Goods:
A demand of ?8,58,107/- was raised for shortages detected during stock taking. The appellant argued that the stock taking was done by eye estimation, which is unreliable. The tribunal noted that the shortage percentage was within permissible limits and referenced case laws such as "Beco Industries Ltd. Vs. CCE, Jamshedpur" to support the argument that minor discrepancies are acceptable.

3. Irregular Availment of Cenvat Credit:
The appellant was accused of availing Cenvat credit of ?79,87,489/- based on invoices without actual receipt of inputs. The tribunal found that the adjudicating authority denied the credit without following proper procedures, referencing "Juhi Alloys Ltd." The tribunal noted that the department did not examine the suppliers or transporters to prove non-receipt of goods, making the denial of credit unsustainable.

4. Penalty Imposition:
Penalties were imposed under Rule 26 of the Central Excise Rules and Rule 15(2) of the Cenvat Credit Rules. The tribunal held that penalties cannot be imposed without proving that the goods were liable for confiscation and without proper evidence. The reliance on third-party documents without corroboration was again highlighted.

5. Departmental Appeal Against Dropping of Demand:
The department contested the dropping of a ?98,29,809/- demand against MBSC. The tribunal upheld the adjudicating authority's decision, noting the lack of sufficient corroborative evidence for undervaluation claims. The tribunal emphasized the need for concrete evidence, such as cash recovery or verified transactions, which were absent in this case.

Conclusion:
The tribunal allowed the appeals in favor of the appellants and dismissed the departmental appeal, citing lack of corroborative evidence and procedural lapses in the investigation and adjudication processes. The judgments emphasized the importance of independent corroboration and adherence to legal procedures in confirming demands and imposing penalties.

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