2024 (2) TMI 13 - AT - Central Excise

Clandestine removal - manufacture and sale of brass/copper patti and sheets - entire case is booked solely based upon private records and statements of alleged purchasers/buyers of said goods - HELD THAT - During investigation no evidence of any unaccounted money having been received by the appellant from any of the buyers was found. In fact investigation was not conducted at factory premises of buyers. Neither there was any entry in their private records showing any unaccounted payment made by them to the appellant. No evidence at all from the buyers located outside Gujarat to whom the goods was sold by the appellant has been produced. The record and the statement of the buyers are also inconclusive and not admissible as evidence and these persons were also in the nature of co-accused. No instance of any money having been received through any agencies have been cited in the show cause notice. Admittedly no evidence of the appellant having received the huge amount in unaccounted manner from buyers to whom goods was sold was found. Not a single instance of cash receipt at appellant s end is on record. In such case when the allegation is based upon the statements of buyers which is not supported by even a single evidence, we are of the view that the demand does not sustain. It is evident from the fact that cogent evidence of disproportionate power consumption, capacity utilization and labour employed, or any cogent evidence of clandestine manufacture of unaccounted quantity alleged as clandestinely removed were not produced by the department. It is evident that unaccounted production in the factory of the Appellant has not been established and therefore the case of clandestine clearance of goods by the Appellant does not stand. The allegation of minor shortage of 1934 Kgs of copper sheet and 617 kgs. brass sheets is also not supported by any evidence as Panchnama dated 05.01.2015 does not record any mode of stock taking or weighment of the finished goods during panchnama proceedings - such allegation of clandestine clearance of goods based merely on above shortage of stock is not sustainable. The demands and penalties made against the appellants is not sustainable and accordingly the impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Allegation of clandestine removal of finished goods.
2. Reliability of evidence based on private records and statements.
3. Alleged minor shortage of stock.
4. Demand of excise duty on job work basis.

Summary:

1. Allegation of Clandestine Removal of Finished Goods:
The appellant was accused of manufacturing and clearing brass/copper sheets clandestinely without recording them in official records. The demand for central excise duty amounting to Rs. 3,20,30,376/- was based on private records and statements of a few buyers. The Tribunal found that the Department did not investigate other alleged buyers and failed to provide evidence of cash transactions, unaccounted money, or unauthorized payments for raw materials. The Tribunal concluded that the case of clandestine clearance was not substantiated due to a lack of tangible proof of unauthorized production and clearance.

2. Reliability of Evidence Based on Private Records and Statements:
The appellant argued that the case was based on private records and statements of co-accused buyers, which were cyclostyled and lacked corroborative evidence. The Tribunal noted that the statements of buyers were identical and pre-dictated, making them unreliable. Additionally, no evidence of transportation, cash receipts, or unaccounted payments was found. The Tribunal cited several case laws emphasizing the need for substantial evidence to prove clandestine removal, which was absent in this case.

3. Alleged Minor Shortage of Stock:
The Department alleged a minor shortage of 1934 kgs of copper sheet and 617 kgs of brass sheets based on a Panchnama dated 05.01.2015. The Tribunal found that the Panchnama did not record the method of stock-taking or weighment, making the allegation of shortage unsupported by evidence. The Tribunal held that visual inspection was insufficient to allege a shortage and that such minor discrepancies could occur due to weighment errors.

4. Demand of Excise Duty on Job Work Basis:
The appellant was also accused of not following the prescribed procedure for job work, resulting in a demand of Rs. 43,98,397/-. The Tribunal found that the appellant had indeed manufactured goods on a job work basis and that the principal manufacturer was an SSI unit availing benefits of Notification No. 08/2003-CE. The Tribunal held that non-compliance with procedural requirements alone could not justify the demand for duty and cited case laws supporting this view.

Conclusion:
The Tribunal set aside the demands and penalties against the appellants, concluding that the Department failed to provide sufficient evidence to substantiate the allegations of clandestine removal and non-compliance with job work procedures. The appeals were allowed with consequential reliefs.