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2020 (1) TMI 542 - AT - Central ExciseClandestine removal - allegation that the appellant had received huge amount of inputs i.e. aluminium wire rods, on which they have availed Modvat credit but, however, they have not accounted the final products which could be manufactured from the said inputs - corroborative evidences or not - HELD THAT - In the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods have been procured to manufacture goods for clandestine clearance. No evidence for extra production or unaccounted cash or statement of buyers or transporters has been obtained. It is a settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing some evidence - The Tribunal has taken consistent view that in absence of corroborative evidence, the charge of clandestine clearance cannot be levelled against the assessee. The whole basis of applying the input output ratio of 1 1 to arrive at the quantity of final products alleged to be clandestinely cleared by the appellant is solely based on the production pattern of other assessee in the same Commissionerate - the learned Commissioner made a fundamental error in making such assumption to raise demand on the allegation of clandestine clearance. In the instant case, no shortages of goods were ever found which fact is on record and not in dispute. In any case, since the whole basis of allegation of clandestine removal is the production pattern of other assessees, which has no legal or scientific basis, the impugned duty demand cannot be sustained. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Allegation of clandestine removal of goods. 2. Application of input-output ratio based on another manufacturer’s production pattern. 3. Lack of corroborative evidence for clandestine removal. 4. Legal standards for proving clandestine removal. Issue-wise Detailed Analysis: 1. Allegation of Clandestine Removal of Goods: The primary issue in this case is whether the appellant clandestinely removed goods without paying Central Excise duty. The Department issued a Show Cause Notice alleging that the appellant received a significant amount of aluminium wire rods, availed Modvat credit, but did not account for the final products manufactured from these inputs. The learned Commissioner confirmed the demand for Central Excise duty along with interest and imposed a penalty based on the assumption that the appellant clandestinely removed the unaccounted final products. 2. Application of Input-Output Ratio Based on Another Manufacturer’s Production Pattern: The learned Commissioner applied an input-output ratio of 1:1, based on the production pattern of NICCO India Ltd., to ascertain the actual quantity of final products manufactured by the appellant. The appellant argued that this ratio could not be applied to their case as they are an SSI unit with potentially different production processes. The Tribunal found that the learned Commissioner made a fundamental error in assuming this ratio to raise the demand, noting that no experiments were conducted in the appellant’s factory to devise specific consumption norms. 3. Lack of Corroborative Evidence for Clandestine Removal: The Tribunal emphasized that no evidence, much less corroborative evidence, was presented to show that the appellant procured input goods to manufacture goods for clandestine clearance. There was no evidence of extra production, unaccounted cash, or statements from buyers or transporters. The Tribunal cited several judicial pronouncements, including the cases of Ghodavat Pan Masala Products Ltd. vs. CCE and CCE vs. Supreme Fire Works Factory, which consistently held that in the absence of corroborative evidence, the charge of clandestine clearance cannot be sustained. 4. Legal Standards for Proving Clandestine Removal: The Tribunal reiterated that the charge of clandestine removal is a serious one, and the onus to prove it lies with the Revenue. The law requires tangible, direct, affirmative, and incontrovertible evidence to prove clandestine manufacture and removal of excisable goods. The Tribunal referred to the case of R. A. Castings Pvt. Ltd. vs. CCE Meerut, which held that high consumption of electricity alone is not sufficient to infer suppression of production. The Tribunal noted that the Revenue did not conduct any experiments in the appellant’s factory to justify the demands raised. Conclusion: The Tribunal concluded that the entire basis of the allegation of clandestine removal was flawed, as it relied on the production pattern of another assessee without any legal or scientific basis. The Tribunal found no evidence to support the charge of clandestine removal and set aside the impugned order. The appeal was allowed with consequential relief as per law. Order Pronounced: (Order pronounced in the open court on 02 January, 2020.)
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