2005 (3) TMI 340 - AT - Central Excise

Removal of Finished goods - Clandestine removal hinges - insufficient Proof of document - register seized from the Assistant Manager of quality control laboratory - Penalty - HELD THAT - The adjudicating authority has arrived at clandestine clearances amounting to Rs. 12, 821.50 MTs. The learned advocate already pointed out the raw materials and electricity consumption required for such huge production. There is absolutely no corroborative evidence for the clearance of such huge goods to various parties. Revenue should have investigated matter thoroughly to bring out evidence and purchase of the unaccounted cement. Same is the case as for as the unaccounted HDPE bags without any corroborative evidence of purchase of raw materials recovery of sale proceeds disposal of unaccounted goods higher consumption of electricity etc. Clandestine removal cannot be proved merely on the basis of the register seized and the statement of certain individuals. The appellant makes a point that what is reflected in the register seized is not different from the production figures reflected in the RG I register. Since Revenue s investigation has not been very thorough we have no other option but to give the benefit of doubt to the appellants. The case laws relied on by the learned consultant are very relevant. Thus the OIO has no merit. We set aside the OIO with consequential relief if any.

Summary

Issues:
1. Demand under various sections of Central Excise Act and Rules.
2. Challenge to findings of adjudicating authority.
3. Lack of evidence for clandestine removal.
4. Corroborative evidence for disposal of finished goods.
5. Capacity of the cement mill and electricity consumption analysis.
6. Lack of incriminating evidence during raids.
7. Investigation into sale proceeds of alleged clandestine removal.

Issue 1: Demand under various sections of Central Excise Act and Rules
The judgment involves appeals against an order passed by the Commissioner of Central Excise Hyderabad, demanding sums under Rule 9(2), Rule 57-I(i)(ii) Penalty, Section 11AC, Rule 173Q, and other provisions of the Central Excise Act. The appellants contested these demands, leading to a detailed examination of the legal provisions and their application in the case.

Issue 2: Challenge to findings of adjudicating authority
The appellants strongly challenged the findings of the adjudicating authority regarding clandestine removal based on a register maintained by an Assistant Manager. They argued that the register's entries did not indicate unaccounted clearances and highlighted discrepancies between the register and statutory records. The Commissioner's conclusions were criticized for overlooking explanations provided by the appellants, leading to a thorough review of the evidence and arguments presented.

Issue 3: Lack of evidence for clandestine removal
The case revolved around the alleged clandestine removal of cement without sufficient evidence to support the claims made by the revenue. The appellants emphasized the absence of proof regarding procurement of raw materials in a clandestine manner and disposal of finished goods. The judgment highlighted the necessity of corroborative evidence to establish clandestine activities, pointing out the insufficiency of private records without supporting documentation.

Issue 4: Corroborative evidence for disposal of finished goods
A key contention raised was the lack of corroborative evidence demonstrating the disposal of finished goods corresponding to the production details recorded. The judgment emphasized the importance of linking production records with material procurement and sales proceeds to substantiate allegations of clandestine removal. The appellants' reliance on relevant case laws underscored the legal principles governing the burden of proof in such cases.

Issue 5: Capacity of the cement mill and electricity consumption analysis
The judgment analyzed the production capacity of the cement mill in question to assess the feasibility of the alleged clandestine removal quantities. By considering the average production rates and electricity consumption patterns, the tribunal evaluated the credibility of the revenue's claims regarding excess production. The correlation between power consumption records and official registers played a crucial role in the decision-making process.

Issue 6: Lack of incriminating evidence during raids
The absence of incriminating evidence during raids conducted by the department raised doubts about the validity of the allegations of clandestine removal. The judgment highlighted the significance of thorough investigations and the need for concrete proof to substantiate claims of wrongdoing. The lack of evidence regarding unaccounted cash and the appellant's status as a Public Limited Company further undermined the revenue's case.

Issue 7: Investigation into sale proceeds of alleged clandestine removal
The judgment noted the absence of investigations into the sale proceeds related to the alleged clandestine removal, which could have provided crucial evidence to support the revenue's claims. The tribunal emphasized the importance of tracing financial transactions and verifying the flow of goods to establish the occurrence of clandestine activities. The lack of evidence regarding the recovery of unaccounted cash further weakened the revenue's position.

In conclusion, the tribunal found that the evidence presented was insufficient to prove clandestine removal conclusively. The appellants were granted the benefit of doubt due to the lack of thorough investigation and corroborative evidence supporting the revenue's claims. The order was set aside, providing consequential relief to the appellants based on the detailed analysis and legal principles applied during the proceedings.