2023 (4) TMI 600 - AT - Central Excise

Clandestine Removal - raw material namely sponge iron was found short in quantity of 403.51 metric ton and finish goods M.S. Ingot was found short of 1952.62 metric tons - no explanation was given by appellants - demand based on the records found during investigation and no statement is relied to demand duty - HELD THAT - In appellants own case, in the case of Unit 1 M/S SOURABH ROLLING MILL PVT LTD. AND SHRI PANKAJ AGARWAL VERSUS PRINCIPAL COMMISSIONER, CENTRAL TAX, CENTRAL EXCISE CUSTOMS, CENTRAL GOODS AND SERVICE TAX, RAIPUR (C.G) 2019 (12) TMI 620 - CESTAT NEW DELHI , this Tribunal held that the charge of clandestine removal cannot be based on series of assumption and presumption, where it should be based on evidence like unaccounted purchase of raw material receipt and consumption of raw material etc. - the demand on the basis of yield production of raw material of sponge iron 403.51 metric ton found short is not acceptable, but at the same time, as no explanation was given by the appellant for shortage of raw material, it is held that (if any) Cenvat credit taken by the appellant on sponge iron is required to be reversed alongwith interest. Shortage of M.S. Ingot - HELD THAT - No explanation was given by the appellant during the course of investigation and defence taken by the learned Counsel for the appellant that no search warrant was issued to the appellant, we hold that the Investigating Agency found during the course of investigation of another unit, some illegal activity like clandestine removal of goods found, in that circumstances, in continuation of search, the search of the Unit can be done. Therefore, the said argument is not acceptable - if investigation could not have been done, the clandestine removal of goods could not be detected and investigation was continuing process and after completion of investigation, the show cause notice has been issued to the appellant. Therefore, it cannot be held that show cause notice issued to the appellant is barred by limitation. This case is based on the records found during investigation and no statement is relied to demand duty. Thereafter, the appellant is liable to pay duty on shortage of finish goods - the appellant is required to reverse Cenvat credit on shortage of sponge iron (if any) and liable to pay duty on M.S. Ingots found short. The duty is payable alongwith interest and penalty imposed on the appellant shall be equivalent to duty payable. Penalty on Shri Pankaj Agrawal is reduced to Rs. 5,00,000/- - Appeal disposed off.

Summary

Issues Involved:
- Confirmation of duty demand against the appellants
- Imposition of penalties on both the appellants

Summary:
The appellants appealed against an order confirming duty demand and imposing penalties. The investigation by the officers of the DGCEI revealed shortages in raw material and finished goods at the appellants' unit. The appellants claimed the investigation was illegal as the unit was closed and no production occurred due to lack of electricity. They argued that the estimation of production was not sustainable, and they were not given a chance to explain the shortages, suggesting it could be a case of theft. The appellants also contended that the show cause notice was time-barred and they were not granted the opportunity for cross-examination.

The authorized representative supported the duty demand, alleging clandestine removal of goods and unexplained shortages. After hearing both parties, the Tribunal found the demand based on yield production of raw material was not acceptable due to lack of explanation for the shortage. However, the appellants were required to reverse any Cenvat credit taken on the raw material with interest. Regarding the shortage of finished goods, since no explanation was provided by the appellants during the investigation, and evidence of illegal activity was found, the duty demand was upheld.

The Tribunal held the appellants liable to pay duty on the shortages of raw material and finished goods, along with interest. The penalty imposed was reduced for one of the appellants. The appeals were disposed of accordingly.