Tribunal overturns duty demand & penalty against Rhoda Textiles due to lack of evidence

The Tribunal set aside the impugned orders confirming a duty demand and penalty against M/s. Rhoda Textiles Pvt. Ltd. The case centered on discrepancies in declared and actual wastage percentages, with the Revenue alleging clearance without duty payment. The Tribunal found the evidence insufficient to prove clandestine removal, emphasizing the need for additional evidence beyond wastage differentials. Consequently, both appeals were allowed with consequential relief, highlighting the necessity of substantial evidence in confirming duty demands and allegations of clandestine removal.

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Issues:
1. Confirmation of demand of duty against M/s. Rhoda Textiles Pvt. Ltd.
2. Imposition of penalty against the Authorized Signatory.
3. Allegation of clandestine removal based on percentage wastage.

Confirmation of Demand of Duty:
The appeals arose from impugned orders confirming a duty demand of Rs. 18,37,145 against M/s. Rhoda Textiles Pvt. Ltd. and imposing an identical penalty. The company, engaged in exporting textile articles, procured fabric duty-free under Rule 19(2) of Central Excise Rules, 2001. Revenue alleged that the difference between declared and actual wastage indicated clearance without duty payment in the domestic market. Proceedings were initiated for the past 5 years resulting in upheld orders by the original adjudicating authority and Commissioner (Appeals).

Imposition of Penalty:
A penalty of Rs. 50,000 was imposed on Shri S.K. Jain, the Authorized Signatory of the company. The Revenue's case primarily relied on the declared percentage wastage compared to the actual wastage reflected in the statutory record. The declared wastage ranged from 4 to 5%, while the actual wastage varied from 7 to 16%. Lack of substantial evidence besides the wastage difference was noted, with the Revenue suggesting the appellant should have declared the higher percentage in their ARE-2.

Allegation of Clandestine Removal:
The Commissioner (Appeals) highlighted the difference in wastage figures between ARE-2 and Form IV register, concluding that excess wastage indicated clearance at the input stage without utilization for the intended purpose. The onus of proving clandestine removal was on the department, and the excess wastage was considered as evidence. However, the appellate authority's decision was based solely on the differential wastage, which was deemed insufficient proof for clandestine removal. A precedent case emphasized the need for evidence regarding the purchaser of allegedly removed goods for confirming demands based on excess wastage.

In conclusion, the Tribunal found no justifiable reasons to uphold the impugned orders, setting them aside and allowing both appeals with consequential relief. The judgment emphasized the importance of substantial evidence beyond wastage differentials to establish allegations of clandestine removal and confirm duty demands.

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