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of <h1>Tribunal Overturns Duty Demand, Penalties; Cites Flawed Methodology and Insufficient Evidence in Excise Case.</h1> The Appellate Tribunal CESTAT, Bangalore, ruled in favor of the appellants, M/s. Hyderabad Electrodes and M/s. Standard Electrodes (P) Ltd., by allowing ... Clandestine removal - Proof - Production and clearance of welding electrodes - confiscation - Penalty - HELD THAT:- Assuming that there is definitely a co-relation between the consumption of Rutile sand and production of welding electrodes, there should be some evidence to show that certain buyers purchased the welding electrodes clandestinely manufactured. Since Rutile sand is not the only raw material, the Revenue should be in a position to show that the other raw materials have also been consumed in excess of what has been accounted in their registers. There should be evidence for the purchase of other raw materials also. There should also be evidence regarding excess consumption of electricity. Revenue relies on the fact that Shri Kazim Malik has given a confessional statement. The statement does not indicate in so many words that the welding electrodes had not been cleared clandestinely. As per the Order-in-Original, Shri Kazim Ali had admitted that Rutile sand in question was brought into factory and utilised by them. From this a conclusion is drawn to the effect that all the rutile sand have been utilised and there is no wastage, hence the welding electrodes should have been produced as per the formula. In the course of adjudication, it was pleaded that the statement of Shri Kazim Ali was under duress. In the absence of other corroboration, the attempt and the charges cannot be sustained purely on the basis of Shri Kazim Ali's statement and the consumption of rutile sand. As thorough investigation has not been done by the Revenue, the charges of clandestine removal are not sustainable. The show cause notice appears to have been issued based on assumptions and presumptions. There is no evidence to show that the currency seized is out of sale proceeds of welding electrodes manufactured and cleared clandestinely. All the case laws relied on by the learned Advocate and Consultant were very relevant. Thus, we are not in a position to uphold the impugned order. Hence the appeals are allowed with consequential relief. Issues:Calculation of duty demand and penalties under Central Excise Rules, confiscation of goods and currency, challenge to impugned order based on alleged clandestine production and clearance of welding electrodes.Analysis:The judgment by the Appellate Tribunal CESTAT, Bangalore involved multiple issues related to the calculation of duty demand and penalties under Central Excise Rules, confiscation of goods and currency, and the challenge to the impugned order based on the alleged clandestine production and clearance of welding electrodes.The impugned order demanded a substantial sum from M/s. Hyderabad Electrodes and M/s. Standard Electrodes (P) Ltd. under Section 11A(1) of the Central Excise Act, 1944, and imposed penalties under Rule 173Q of the Central Excise Rules, 1944. Additionally, currency seized from the premises of the Managing Director was confiscated under Section 121 of the Customs Act, 1962, with penalties imposed under Rule 209 of CER, 1944. Goods seized from other entities were also held liable for confiscation with penalties imposed under relevant rules.The appellants contested the order, arguing various points through their Advocate and Consultant. They challenged the Department's calculation methodology, lack of evidence for clandestine activities, and the legality of the confiscation of currency. They relied on case laws to support their arguments and emphasized the burden of proof on the Revenue.Upon careful review, the Tribunal found the Revenue's approach flawed, particularly in linking the production of welding electrodes solely to the consumption of Rutile sand without considering other essential raw materials. The Tribunal highlighted the absence of concrete evidence supporting the allegations of clandestine activities, emphasizing the need for corroboration beyond the statement of the Managing Director. The Tribunal concluded that the charges were not sustainable due to insufficient investigation and issued assumptions, ultimately allowing the appeals and providing consequential relief to the appellants.In conclusion, the judgment addressed key issues surrounding duty demand, penalties, confiscation, and allegations of clandestine activities, ultimately ruling in favor of the appellants due to the lack of substantial evidence supporting the Revenue's claims.
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