2024 (11) TMI 1079 - AT - Central Excise

Clandestine removal - allegation of shortage of raw material for clearance of the finished goods - Procedural lapses in investigation and stock verification or not - Revenue submits that the respondent, since initiation of the investigation, has only tried to hide their incriminating activities by citing the shortcomings of the Departmental officers and have tried to divert the entire attention towards the allegedly procedural lapses during the investigation - HELD THAT - It is an admitted position that the investigation which has been carried out, lacks the following of proper procedure. To allege clandestine removal of goods, proper procedure was required to be followed. During the course of investigation, it is a position on the record, that physical verification of the stock was not done; it was only done on eye-estimation basis and the alleged shortage of raw material has not been supported by any tangible evidence. Although allegation of clandestine clearance thereof has been raised by the investigating team, the suppliers of raw material were examined and no discrepancies could be found in the raw materials supplied to the respondent. Before adjudication, the adjudicating authority had sought a report from the jurisdictional Range Officer, who had also not found any discrepancy in the activity of the respondent - Moreover, it has been alleged that the respondent has manufactured the final product and cleared the same clandestinely, but while doing so, the Revenue on the one side alleges that there was a shortage of raw material and on the other side, alleges clandestine clearance of finished goods, all the while without bringing any evidence on record to show as to from where the respondent procured raw materials to manufacture the goods which were alleged to have been cleared clandestinely. The investigating team has not alleged any excess consumption of electricity, shown as to how the goods were transported or as to how much labour was employed. The observations made by the ld. adjudicating authority in the impugned order agreed upon. It is also seen that no tangible evidence in support of the allegation of shortage of raw material for clearance of the finished goods has been brought on record by the Revenue, other than the statement recorded during the investigation of Shri Munnoo Prasad Jaiswal, the authorized signatory of the respondent. The charge of clandestine removal of the goods and shortage of raw materials is not sustainable - There are no infirmity in the impugned order and the same is upheld - the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:

1. Allegation of clandestine removal of goods.
2. Allegation of fabrication of documents and mis-declaration.
3. Alleged evasion of Central Excise Duty and wrongful availing of CENVAT Credit.
4. Procedural lapses in investigation and stock verification.
5. Lack of corroborative evidence to support allegations.

Detailed Analysis:

1. Allegation of Clandestine Removal of Goods:

The Revenue alleged that the respondent clandestinely removed goods, specifically TMT Bars, M.S. Billets, Sponge Iron, and Pig Iron, without payment of Central Excise duty. The investigation revealed discrepancies between the book stock and physical stock, suggesting possible clandestine removal. However, the adjudicating authority found that the stock verification was conducted on an estimation basis without actual weighment, rendering the allegations unsustainable. The respondent argued that the alleged shortages were based on estimation and not supported by tangible evidence. The adjudicating authority concluded that the Revenue failed to provide sufficient, tangible, direct, affirmative, and incontrovertible evidence to prove clandestine removal.

2. Allegation of Fabrication of Documents and Mis-declaration:

The Revenue contended that the respondent fabricated documents and mis-declared facts, showing excess clearance of M.S. Billets than the actual stock available. The adjudicating authority, however, found no discrepancies in the respondent's records, which were maintained in the computer and verified by the jurisdictional officer. The respondent's defense highlighted that the alleged shortages were due to estimation errors and not actual discrepancies, and the adjudicating authority agreed, noting the absence of any weighment slips or concrete evidence to support the allegations.

3. Alleged Evasion of Central Excise Duty and Wrongful Availing of CENVAT Credit:

The Revenue alleged that the respondent evaded Central Excise Duty amounting to Rs.1,71,50,244/- and wrongly availed CENVAT Credit amounting to Rs.2,15,74,176/-. The adjudicating authority dismissed these allegations, citing the lack of evidence to support the claims. The respondent provided audited financial statements, sales tax returns, and electricity bills, which corroborated their records and disproved the allegations of evasion and wrongful credit availing. The adjudicating authority emphasized that the burden of proof was on the Revenue, which was not met in this case.

4. Procedural Lapses in Investigation and Stock Verification:

The investigation was criticized for procedural lapses, including the absence of actual weighment during stock verification and reliance on estimation. The adjudicating authority noted that the investigation was completed within 12 hours, which was insufficient for a thorough examination. The respondent argued that the investigation was flawed, as no seizure memo was provided, and the verification was based on eye-estimation. The adjudicating authority agreed, stating that the investigation lacked proper procedure and tangible evidence, rendering the allegations unsustainable.

5. Lack of Corroborative Evidence to Support Allegations:

The adjudicating authority highlighted the absence of corroborative evidence, such as identification of buyers, transportation records, or private documents, to support the allegations of clandestine removal. The Revenue's case was based solely on an erroneous stock verification report, which could not be relied upon without supporting evidence. The adjudicating authority emphasized that allegations of clandestine removal require strong evidence, which was lacking in this case. Consequently, the charges against the respondent were dropped, and the appeal filed by the Revenue was dismissed.