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2025 (4) TMI 367 - AT - Central ExciseTime limitation for filing SCN - four years taken to complete the investigation - Clandestime removal of raw materials - existence of evidence to uphold the demand present or not - demand based on assumptions and presumptions - Section 11A(11) of the Central Excise Act 1944 - HELD THAT - It is found that in the impugned case central excise officers visited the premises of the appellants on 19.11.2011 and they have taken around 04 years to complete the investigation and issued a show cause notice on 17.06.2016 on the alleged excess/ shortage found during the physical stock taking. They have further taken some time to issue a corrigendum dated 02.03.2017 alleging that the appellants have clandestinely removed the raw materials on which CENVAT credit was taken. The show cause notice demanding the CENVAT credit has been issued on the basis of a calculation shown in the show cause notice. Apparently the due allowance was not given to the manufacturing losses and input contained in work in progress as contended by the appellants. This is not the correct manner to arrive at the quantity of raw material alleged to have been clandestinely removed. Moreover it is found that having alleged clandestine removal of raw material Revenue has not questioned any of the transporters or buyer to establish that there was a clandestine removal of raw material. The clandestine removal cannot be established with a mathematical precision. At the same time the clandestine removal cannot be alleged only on the basis of a mathematical formula or arithmetic calculation. Any such allegation needs to be termed as assumption/ presumption or conjecture/ surmise. It cannot be evidence in itself to uphold the alleged demand. The coordinate Bench of the Tribunal in the matter of Nova Petrochemicals v. CCE Ahmedabad-II 2013 (11) TMI 626 - CESTAT AHMEDABAD has held that There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions. Conclusion - There is considerable force in the submission of the appellants on legal issues that the show cause Notice is barred by limitation and the adjudication order was issued beyond the time period specified under Section 11A(11) of the Central Excise Act 1944. However the appellants have a strong case on merits and as such other issues are required to be considered. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are: 1. Whether the show cause notice issued to the appellants was barred by limitation under the relevant provisions of the Central Excise Act, 1944. 2. Whether the allegations of clandestine removal of raw materials by the appellants were substantiated by sufficient evidence. 3. Whether the adjudication order was issued beyond the time period specified under Section 11A(11) of the Central Excise Act, 1944. ISSUE-WISE DETAILED ANALYSIS 1. Limitation of Show Cause Notice - Relevant legal framework and precedents: The appellants argued that the show cause notice was issued beyond the permissible time frame, citing precedents such as Nizam Sugar Factory and Malleable Iron and Steel Casting Co. Pvt. Ltd., which establish that a subsequent show cause notice cannot extend the limitation period. - Court's interpretation and reasoning: The Tribunal noted that the central excise officers visited the premises in November 2011, but the show cause notice was only issued in June 2016, with a corrigendum in March 2017. The Tribunal found merit in the appellants' contention that the notice was issued after an unreasonable delay. - Application of law to facts: The Tribunal acknowledged that the delay in issuing the show cause notice was not justified, aligning with the legal precedents cited by the appellants. - Conclusions: The Tribunal concluded that the show cause notice was indeed barred by limitation. 2. Allegations of Clandestine Removal - Relevant legal framework and precedents: The appellants contended that the allegations of clandestine removal were not supported by evidence, referencing cases like L.R. Steel Union Pvt Ltd and Krishna @Company, which emphasize the need for concrete evidence in such matters. - Court's interpretation and reasoning: The Tribunal observed that the Revenue did not provide sufficient evidence, such as statements from transporters or buyers, to substantiate the allegations of clandestine removal. The Tribunal referred to the Nova Petrochemicals case, which outlines the criteria for establishing clandestine manufacture and clearance. - Key evidence and findings: The Tribunal found that the Revenue's case was based on assumptions and arithmetic calculations rather than tangible evidence. - Application of law to facts: The Tribunal determined that the Revenue failed to meet the burden of proof required to establish clandestine removal. - Conclusions: The Tribunal concluded that the allegations of clandestine removal were not substantiated by sufficient evidence. 3. Timeliness of Adjudication Order - Relevant legal framework and precedents: The appellants argued that the adjudication order was issued beyond the time frame specified under Section 11A(11) of the Central Excise Act, 1944. - Court's interpretation and reasoning: The Tribunal found that the adjudication order was indeed issued beyond the stipulated period, supporting the appellants' argument. - Conclusions: The Tribunal concluded that the adjudication order was not issued within the required time frame, rendering it unsustainable. SIGNIFICANT HOLDINGS - Preserve verbatim quotes of crucial legal reasoning: The Tribunal emphasized, "I am of the considered opinion that clandestine removal cannot be alleged only on the basis of a mathematical formula or arithmetic calculation. Any such allegation needs to be termed as assumption/ presumption or conjecture/ surmise. It cannot be evidence in itself to uphold the alleged demand." - Core principles established: The judgment reinforced the principle that allegations of clandestine removal require tangible evidence and cannot be based solely on assumptions or calculations. Additionally, it highlighted the importance of adhering to statutory time limits for issuing show cause notices and adjudication orders. - Final determinations on each issue: The Tribunal allowed the appeal, concluding that the show cause notice was barred by limitation, the allegations of clandestine removal were not substantiated by sufficient evidence, and the adjudication order was issued beyond the permissible time frame.
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