2019 (11) TMI 120 - AT - Central Excise

Clandestine removal - duty paid would have been available as refund through PLA under N/N. 39/2001 - Shortage of total production - HELD THAT - The Revenue recorded the statements of Shri Dipak Arora, Manager (Commercial) and Shri Kunal Bubna, General Manager (Commercial and Finance) both of them admitted that while there was no stock of 12mm TMT bars, the daily stock account showed 368.54 MT. However none of them admitted that there was any clandestine clearance. Both of them claimed that the said discrepancy was a result of the fact that while the when TMT bars was manufactured no actual weighment was done at the time of entering into the daily stock account - The charge of clandestine clearance has been made without any other evidence and it is a conclusion drawn solely on the basis of the discrepancy in the physical stock vis a vis daily stock account. This discrepancy needs to be appreceiated in the background of the fact that the discrepancy consist of only 0.31% of the total production during the said period and also from the fact that the appellant do not stand to gain by evading Central Excise Duty as they were availing benefit of Notification No. 39/2001-CE which entitled them to claim refund duty paid through PLA in cash - where the shortage was insignificantly low as compared to total production and the appellants were not gaining by clandestine clearance and in absence of any positive evidence of clandestine removal, the charge of clandestine removal cannot be sustained. In instant case appellant has been able to show that plausible reason of the discrepancy and also the fact that there is no gain to be made by clandestine clearance in terms of Central Excise Duty thus decisions relied upon by the Commissioner (Appeals) are on significantly different facts - appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of Central Excise, interest, and imposition of penalty under Section 11AC of Central Excise Act, 1944 read with Section 25 of the Central Excise Act, 2005 based on shortage of TMT bars in stock taking.

Analysis:

1. Confirmation of Demand and Penalty:
The appeal filed by M/s. Varsana Ispat Ltd (VIL) and Shri. Kunal Bubna, General Manager, was against the confirmation of demand, interest, and penalty under relevant sections due to a shortage of 12mm TMT bars in the stock. The discrepancy arose from the recording of manufactured quantity without proper weighment. Shri. Kunal Bubna admitted the shortage but attributed it to approximate weight recording errors. The Additional Commissioner initially dropped the proceedings, citing lack of evidence of clandestine removal and the appellants' compliance with Notification No. 39/2001-CE. However, the Revenue challenged this decision before the Commissioner (Appeals).

2. Allegations of Clandestine Removal:
The Commissioner (Appeals) upheld the charge of clandestine removal based on the discrepancy in stock, rejecting the appellant's contentions regarding the insignificant percentage of shortage and lack of TMT bars production in the past year. The Commissioner relied on specific case laws to support the charge, emphasizing the appellant's failure to explain the shortage adequately during verification.

3. Appellant's Arguments and Legal Precedents:
The appellant's counsel referred to similar cases where demands were dropped under comparable circumstances, citing precedents like Rashtriya Ispat Nigam Ltd. and Widia India Ltd. The counsel argued that the charge of clandestine removal was unsustainable given the circumstances and legal precedents.

4. Tribunal's Decision and Legal Rationale:
Upon review, the Tribunal found that the charge of clandestine removal was not substantiated, as the discrepancy in stock was minimal (0.31% of total production) and the appellants did not benefit from evading duty due to their entitlement to claim refunds under Notification No. 39/2001-CE. The Tribunal highlighted the lack of positive evidence supporting clandestine removal and referenced previous decisions to support its ruling, emphasizing the negligible nature of the shortage and the absence of any gain from evasion.

5. Final Verdict and Conclusion:
Ultimately, the Tribunal set aside the demand, interest, and penalty, allowing the appeals on the grounds that the charge of clandestine removal was not sustainable given the circumstances and legal precedents cited. The decision was pronounced on 01.11.2019 by the Tribunal.

This detailed analysis covers the issues raised in the legal judgment concerning the confirmation of demand, allegations of clandestine removal, legal arguments presented, the Tribunal's decision, and the final verdict.