2020 (3) TMI 584 - AT - Central Excise

Court overturns duty evasion and penalty based on lack of concrete evidence, emphasizing need for proof beyond record discrepancies.

The appeal was allowed as the court found that the Revenue failed to provide substantial positive evidence beyond record discrepancies to prove ... Clandestine Removal - Brass Ingots - considerable difference in the quantity of various excisable goods manufactured as shown under the heads of manufactured, cleared and under closing balance in the records maintained for central excise purpose viz-a-viz quantity shown in the balance sheet for the financial year 2008-2009 - HELD THAT:- Admittedly the entire case of the Revenue is based upon the mis-match of quantities as reflected in the excise records and the account records of the assessee. There is no evidence to show the receipt of the excess raw materials, manufacture of the excess final product and transportation of the same as also the identification of the customers. Tribunal in the case of M/S. SAC POLYMERS VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS & CGST, NEW DELHI [2018 (7) TMI 523 - CESTAT NEW DELHI] have observed that charge of clandestine removal cannot be established merely on the ground of difference in the balance sheet and the statutory record unless the same is corroborated by any other evidence showing receipt of raw material, consumption of the same, production and removal of the final product. It is well established that the onus to prove the charges of clandestine removal lies very heavily upon the Revenue and is required to be discharged with production of sufficient positive evidences. The same cannot be based upon assumptions and presumptions - Admittedly, in the present case, there is no evidence produced by the Revenue indicating the clandestine clearance of the goods except the difference in the figures. The same cannot be adopted as sufficient evidence for upholding the charge of clandestine removal. Appeal allowed - decided in favor of appellant. Issues: Alleged evasion of duty based on mismatch of quantities in excise records and account records; Challenge on limitation of the demand raised after the normal period.Analysis:1. The appellants were involved in the manufacture of unwrought zinc, ingots, brass cast bars, and copper cast bars falling under specific chapters of the Central Excise Tariff Act, 1985.2. During an audit, a significant difference was noted in the quantity of excisable goods manufactured, cleared, and in closing balance as per the records for the financial year 2008-2009.3. The audit revealed discrepancies in the closing stock of zinc sulphate hepta and brass ingots as per the excise records compared to the balance sheet, alleging excess clearance of brass ingots without duty payment.4. The appellants provided a reconciliation statement certified by a Chartered Accountant, stating the presence of brass cast stock at their depot and the clearance of lead scrap as brass ingots.5. Subsequently, a show cause notice was issued, alleging duty evasion of Rs. 30,22,661, invoking the extended period for demand confirmation, interest, and penalty imposition, leading to the present appeal after orders by the original adjudicating authority and Commissioner (Appeals).6. The appellant's advocate argued that the Revenue's case solely relied on discrepancies in records without corroborative evidence of clandestine removal, citing Tribunal decisions and challenging the demand's limitation period based on a High Court ruling.7. The Member (Judicial) observed that the Revenue's case lacked evidence beyond record discrepancies to prove clandestine removal, emphasizing the necessity for positive evidence, referencing Tribunal decisions where discrepancies alone were insufficient to establish clandestine removal charges.8. The judgment highlighted that proving clandestine removal requires substantial positive evidence, not assumptions. As the Revenue failed to provide such evidence beyond record discrepancies, the charge of clandestine removal was not upheld, leading to setting aside the impugned order and allowing the appeal with consequential relief.