2012 (6) TMI 72 - AT - Central Excise

Tribunal overturns duty demand & penalty on appellants due to lack of concrete evidence

The Tribunal set aside the duty demand and penalty imposed on the appellants for alleged shortages in finished goods and inputs. The decision emphasized ... Clandestine removal - whether the shortages detected by the officers on weight method, can be said to be on account of clandestine removal - Held that:- There are number of decisions laying down that shortage detected at the time of visit of officers cannot admittedly lead to the findings of clandestine removal in the absence of sufficient corroborative evidences. In view of the foregoing, impugned order is set aside and appeal of appellant is allowed with consequential relief Issues involved:Allegations of shortage in finished goods and inputs leading to demand of duty and penalty based on clandestine removal.Analysis:1. Shortage of Goods and Inputs:The case involved the appellants, engaged in manufacturing MS Ingots, Sponge Iron & MS Scrap, facing allegations of shortage in stock during a visit by Central Excise officers. The shortage was accepted by the appellant's representative, but no satisfactory explanation was provided. This led to the initiation of proceedings through a Show Cause Notice resulting in the confirmation of duty demand and penalty by the Assistant Commissioner.2. Contestation of Shortage and Method of Stock Verification:The appellant contested the shortage, arguing that the stock verification was based on eye estimation rather than actual weight system. The officers' investigation report alleged clearance of final products without duty payment. However, the appellate authority observed discrepancies in the stock verification method, noting that the officers used an average weight system. The question arose whether the shortages detected through this method could be attributed to clandestine removal.3. Legal Precedents and Burden of Proof:The judgment referred to previous decisions emphasizing the need for sufficient corroborative evidence to prove allegations of clandestine removal. Citing cases like IP Industries and Durga Trading Company, it highlighted that charges of clandestine removal must be supported by concrete evidence, not solely based on shortages detected during visits. The judgment stressed that clandestine activities are quasi-criminal in nature, requiring strong evidential support.4. Decision and Legal Basis:In light of the legal precedents and the lack of concrete evidence supporting the allegations of clandestine removal, the Tribunal set aside the order confirming duty demand and penalty. The judgment concluded that mere shortages detected during stock verification, without additional corroborative evidence, were insufficient to establish clandestine removal. The appeal was allowed, providing consequential relief to the appellant.5. Conclusion:The judgment highlighted the importance of proper stock verification methods and the necessity of strong evidential support in cases involving allegations of clandestine activities. It underscored that allegations of clandestine removal must be proven with concrete evidence beyond mere shortages detected during visits. The decision served as a reminder of the legal standards required to establish such serious accusations in excise matters.