2018 (7) TMI 1779 - AT - Central Excise

Tribunal overturns duty demand, upholds Cenvat Credit due to lack of evidence

The Tribunal set aside the duty demand for clandestine removal and confirmed Cenvat Credit availed on raw material due to insufficient evidence. The ... Clandestine removal - pig iron - the pig iron had been cleared by them without reversal of applicable Cenvat Credit - Held that:- Admittedly the entire case of the Revenue is based upon the entries made in the said log sheet read with the statement of the Director - The Revenue has not made any efforts to further Investigate the matter. No buyer of the goods, as detailed in the said log sheets has been approached by the Revenue so as to investigate the matter at that end. The appellants have contested the statement as having been given under duress, as the language of the statement itself suggests. In any case, it is found that the statement by itself cannot be made the basis for arriving at the clandestine activities and such confessional statements are required to be corroborated by independent evidences - The allegations of clandestine removal is a serious charge and the onus to discharge the same is upon the Revenue, who is required to prove it by production of sufficient and admissible legal evidence. CENVAT Credit - it was alleged that input pig iron stands cleared by the appellant after availing the Cenvat Credit - Held that:- Apart from the fact that Revenue has alleged sale of the pig iron, there is no investigations either at the end of the buyers or transporters or the manner of receipt of consideration for the same. Further no inventories were made at the time of stock-taking and there is nothing on record to show that the stock available at the production floor or as work in progress was also taken into consideration. The entire investigations of the Revenue are flimsy and does not take the matter to its logical end. Appeal allowed - decided in favor of appellant. Issues:1. Allegations of clandestine removal of final products2. Denial of Cenvat Credit on pig ironAnalysis:1. Allegations of Clandestine Removal:The case involved the appellant, engaged in manufacturing castings, facing allegations of clandestine removal of final products. The officers found discrepancies during a visit to the factory, including NIL stock of pig iron despite Cenvat Credit entries. The director admitted to clearing pig iron without reversing the credit and acknowledged short-payment of duty. The show cause notice proposed duty demand for clandestine removal and confirmed Cenvat Credit availed on raw material. The Tribunal noted the findings were based on a private register and the director's statement. The appellant contested the entries' accuracy, highlighting the lack of evidence on excess production, raw material receipts, or buyer details. The Tribunal emphasized the need for independent evidence to prove clandestine activities, criticizing the lack of further investigation by the Revenue. Citing precedent, the Tribunal held the findings unsustainable due to insufficient evidence and set aside the orders.2. Denial of Cenvat Credit on Pig Iron:The appellant also contested the denial of Cenvat Credit on pig iron, challenging the lack of corroborative evidence. The department failed to identify buyers, examine staff, or investigate the destination of the removed pig iron. No physical stock verification or enquiries on pig iron usage were conducted, with mere allegations of sales without supporting inventory checks. The Tribunal agreed with the appellant, criticizing the Revenue's inadequate investigations and lack of follow-through. Highlighting the absence of buyer inquiries or consideration receipt details, the Tribunal deemed the Revenue's case weak and unsustainable. Consequently, the Tribunal allowed the appeals, providing relief to the appellants by setting aside the impugned orders.In conclusion, the judgment addressed the issues of clandestine removal and denial of Cenvat Credit meticulously, emphasizing the necessity of robust evidence and thorough investigations to substantiate allegations. The Tribunal's decision underscored the importance of due diligence and comprehensive fact-finding in excise duty matters, ultimately ruling in favor of the appellants due to the Revenue's failure to meet the burden of proof.