2025 (7) TMI 1136 - AT - Central Excise

Clandestine removal of scrap - allegation based on assumption and presumption and surmises - relied upon document (copy of the challan) has not been provided - levy of penalty - HELD THAT - There is no evidence documents etc. on the basis of which the demand has been calculated. The Appellant has all along denied having removed any scrap in a clandestine manner. It is also observed that when the Appellant assessee to purchase peace of mind and the harassment on account of alleged clandestine removal of scrap accepted the demand and paid on 17.12.2013 i.e. much before the issuance of the SCN (deposited in Government account vide GAR-7 Challan No.00002 dated 27.12.2013 of State Bank of India Muzaffarnagar) and the SCN has been subsequently issued on 08.01.2015. It has been time and again held by the Tribunal and the superior Courts that when the demand has been paid much before issuance of the SCN there is no plausible reason to issue the SCN. But these judicial decisions are not being followed and there is a judicial indiscipline on the part of the Department in doing so resulting in these petty matters travelling up to the Tribunal and the litigation never ends. It is the consistent view of the Tribunal and the superior Courts that when the demand made by the Department was paid by the Assessee much before the issuance of the SCN to purchase peace no penalty should have been imposed on the Appellant on this count. The demand of Rs.45, 361/- is set aside. The penalty of Rs.45, 361/- imposed in terms of Rule 25(1) of the Central Excise Rules 2002 read with Section 11AC(1)(c) of the Central Excise Act 1944 is set aside - Appeal allowed.

Summary

ISSUES:

Whether the demand of Central Excise duty on alleged clandestine removal of iron and steel scrap is sustainable in absence of direct or indirect evidence.Whether a statement alone, without corroborative evidence, can form the basis for confirming clandestine removal and consequent duty demand.Whether penalty under Section 11AC(1)(c) of the Central Excise Act, 1944 is justified when the demand was paid prior to issuance of the show cause notice.Whether the issuance of a show cause notice after payment of demand affects the maintainability of penalty and demand.

RULINGS / HOLDINGS:

The demand of Rs.45,361/- on account of alleged clandestine removal of scrap is based on "assumption and presumption and surmises" and not supported by any evidence; hence, it is not maintainable.A statement of the proprietor admitting clandestine removal, without any corroborative evidence, "cannot be concluded" as sufficient proof for confirming the demand.Since the demand was deposited by the appellant "much before the issuance of the SCN," the subsequent issuance of the show cause notice and imposition of penalty is unwarranted and reflects judicial indiscipline.The penalty imposed under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11AC(1)(c) of the Central Excise Act, 1944 is set aside on the ground that no clandestine removal was established and demand was paid prior to SCN issuance.

RATIONALE:

The Court applied the legal framework under the Central Excise Act, 1944, and Central Excise Rules, 2002, particularly Sections 11A and 11AC, emphasizing the requirement of evidence beyond mere assumptions for confirming clandestine removal and demand.Precedent and consistent Tribunal and superior Court rulings were cited to reinforce the principle that payment of demand prior to issuance of SCN negates the justification for penalty imposition and further proceedings.The Court highlighted a doctrinal stance against issuing SCNs after demand payment, describing such practice as "judicial indiscipline" leading to unnecessary litigation.No dissenting or concurring opinions were noted in the judgment.