2023 (5) TMI 514 - AT - Central Excise

Clandestine removal - shortage of raw material - corroborative evidences or not - panchnama based on eye evidences - demand based on assumptions - HELD THAT - There is no denial to the fact that the assessment at the time of search and preparation of Panchnama is on Eye estimation hypothetical basis. There has been catena of decisions to hold that such weight assessment is irrational, illogical and totally incorrect to allege that there is a shortage noticed at the time of verification. The earlier decision of this Tribunal in the case of BEHARIJI MARKETING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2015 (10) TMI 1954 - CESTAT NEW DELHI has been relied upon, where it was held that there is no evidence of clandestine removal of the goods. The appellant s representative had only accepted the shortages and there is no inculpatory statement admitting clandestine removal of the such alleged short found goods. There are no reason to differ from those authorities. Resultantly, the impugned decision is observed to be nothing but an act of violating judicial protocol. The adjudicating authority has failed to take into consideration the relevant decisions on this aspect even Departments own decision has been miserable ignored. The findings are not at all in terms of the directions given while remanding the matter to the adjudicating authority. Above all, the calculations as tendered today reveals that there was a miniscule shortage had the quantity of bath tank would have been considered. The calculations are based upon the figures already on record. Otherwise also as already observed above the shortcoming as noticed was 67.882 MTs only. The invoices on record for sale of recovered zinc from the tank clearly explain the said shortage. It becomes clear that had the quantum of zinc in bath tank would have been considered, there would not have been alleged shortage except for the miniscule which is unavoidable on account of wastage. The allegations otherwise are of clandestine removal. Department has not produced any evidence to show that the appellant has cleared goods without invoice or without payment of excise duty. No single document was found issued by the appellant nor there was a confessional statement of the appellant. Alleged shortage, as discussed above, is not at all sustainable. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the clandestine removal of finished goods, demand of Central Excise duty, Cenvat Credit on inputs, and the consideration of zinc quantity in the bath tank for duty calculation.

Clandestine Removal of Finished Goods:
The appellant, engaged in manufacturing transmission line structures, was alleged to have engaged in clandestine removal of finished goods based on a Show Cause Notice issued after a physical stock taking revealed shortages. The demand included Central Excise duty on finished goods found short, Cenvat Credit on inputs found short, and short paid Central Excise duty. The Tribunal had remanded the matter previously for considering the quantity of zinc in the bath tank, which was not adequately addressed by the adjudicating authority. The appellant argued that the shortages were minimal and attributed to wastage during the manufacturing process.

Consideration of Zinc Quantity:
The appellant contended that the quantity of zinc in the bath tank had not been properly considered by the adjudicating authority, leading to erroneous findings. The appellant presented evidence of zinc extraction and sale from the bath tank after closing manufacturing activities, which demonstrated that the alleged shortage was negligible. The appellant also highlighted a subsequent show cause notice decided in their favor by the Department, along with relevant case laws to support their arguments.

Legal Interpretation and Decision:
After hearing both parties, the Tribunal observed that the adjudicating authority failed to consider the quantity of zinc in the bath tank as directed in the previous remand order. The Tribunal found the assessment based on eye estimation during the search to be irrational and illogical. The Tribunal cited previous decisions to emphasize the importance of accurate weight assessment and criticized the authority for disregarding relevant precedents and the Department's own decisions. Ultimately, the Tribunal set aside the findings in the order under challenge, allowing the appeal due to lack of evidence supporting the allegations of clandestine removal and unsustainable shortage.