2021 (6) TMI 856 - AT - Central Excise

Clandestine Removal - M.S. Ingot - TMT bars - shortage in the stock of ingots due to high burning loss - uncorroborative seizure of the finished goods - defective stock verification - corroborative evidence or not - HELD THAT - The burning loss in this type of industry varies from time to time depending upon the quality of inputs, the condition of furnace, climatic condition, etc. Further, the Director of the appellant company at the time of recording of his statement under Section 14 gave a plausible explanation, that shortage is attributable to high burning loss depending upon the various factors and failure by them to record the actual burning loss, as the production is recorded on the estimate basis, whereas the sale of finished goods is recorded on actual weight basis. The appellant also manufactures M.S. Billets, for which M.S. Ingots is the raw materials, in such process also there is burning loss. Thus, the explanation given by the appellants for the apparent shortage is held to be plausible, as the same has been rejected summarily by the Department without reference to the books of accounts and other records maintained by the appellant - further, there is no other corroborative evidence brought on record with respect to the allegation of clandestine removal, which is a serious charge and has to be proved beyond doubt. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant evaded excise duty by clandestine removal of finished goods amounting to ?29,12,365 during 2012-2013.

Analysis:
1. The appellant, a manufacturer of iron and steel products, faced allegations of evading excise duty through clandestine removal of finished goods. The stock verification conducted on the factory premises revealed a shortage of 725 MT of ingots compared to the book stock, leading to a duty demand of ?29,12,365.

2. The appellant contested the show cause notice, attributing the shortage to high burning loss. They argued that the shortage was due to under-accounting of process loss and recording higher production than actual, not clandestine removal. The appellant emphasized that they had not engaged in any clandestine removal of goods.

3. The Joint Commissioner adjudicated the matter, confirming the duty demand, imposing penalties, and appropriating the pre-deposit made during the investigation. The Commissioner (Appeals) upheld the shortage but set aside the penalty under Rule 27.

4. The appellant appealed to the Tribunal, arguing that the shortage was estimated on inspection day without proper calculation. They highlighted the absence of evidence supporting clandestine removal, such as seized goods, unidentified buyers, or unexplained cash. The appellant emphasized the plausible explanation provided for the shortage due to discrepancies in recording burning loss.

5. The Tribunal considered the varying burning loss in the industry and the appellant's explanation for the shortage. The Tribunal found the appellant's explanation plausible, criticizing the Revenue for rejecting it summarily without considering the appellant's records. The Tribunal emphasized the lack of corroborative evidence for the allegation of clandestine removal, stating that such serious charges must be proven beyond doubt.

6. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant on 23.06.2021.