TaxTMI 
TaxTMI 
2019 (4) TMI 639
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.... the officer undertook the stock challenge of finished goods viz. MS billets and also stock of inputs, such as sponge iron, pig iron and MS billet as raw material within the factory. While conducting the joint physical verification of finished goods and inputs as indicated above, the stock of physical stocks of MS billet (finished goods) inside the factory of Appellant No. (1) was found to be NIL. However, the daily stock account maintained reflected the opening balance on the day of stock taking i.e. on 30.1.2012 as 1948.045 MT. Similarly the shortage was also noticed in the raw materials and inputs being utilised by the Appellant No. 1 in respect of pig iron, MS billet and sponge iron. During the search operation and investigation records were resumed by the departmental officer and the statements of the key person viz. Commercial Manager and Authorised Representative of the Appellant No. 1 and their Director, (Noticee No. 2) were also recorded on various occasions. It was seen during the stock verification that the shortage in respect of finished goods as well as key inputs were found to be not tallying as per the record maintained by the Appellant No. 1 and also ER-I, ER-5 and ....
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.... respect of finished excisable goods and cenvatable inputs. While admitting the shortage of these goods, he never admitted the same to have been clandestinely removed. In his statement, he only stated that he will discuss the shortage with the management and take appropriate steps. 6. Statement of Shri Amit Kumar, Noticee No. 2, Director of the company was also recorded by the department on various occasions. He was categorically asked about the shortage of the finished goods and cenvatable input found during the joint stock taking. While he agreed the shortage found during the joint stock taking by the departmental officer but never ever accepted the clandestine removal of such goods. In reply to repeated question, he stated that he is in agreement with statement given by the Authorised Signatory and Commercial Manager of the appellant. He also submitted that the unit is medium scale integrated plant and physical shortage of finished goods and raw material could be due to various reasons such as stock lying in the furnace or at the TMT shop floor or even in the slags lying scattered in the various area of the manufacturing plant. He further stated that the joint stock verificatio....
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....ty of slag is generated, which contains huge quantity of sponge iron, pig iron and brass. Besides, sufficient quantity of sponge iron, pig iron and scrap are within the furnace every time and about 150-200 MT of MS billets were always present within the reheating furnace for production of TMT bars because of its nature of continuous processing. The departmental officers have ignored the same while conducting the joint stock verification. The ld. adjudicating authority also failed to appreciate the fact that the entire stock taking done at the time of joint stock verification could not have been possible within a period of two days considering the quantity involved for the weighment. The weigment slip which have been adduced evidence would not have been carried out in actual since considering the time required for such weighment. From the perusal of the weigment slip, it appears that the gross amount per truck has been more than 40 MT in each case. It was submitted that when the capacity of truck are around 20-22 MT, such enormous increase in the gross weight evidenced the fact that weighment done by the department is arbitrary and has been conducted in an illegal manner. 10. The l....
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....3/15 (16) Bhushan Strips Ltd. Vs. CCE - 2005 (179) ELT 419(T); (17) Oudh Sugar Mills Ltd. Vs. UOI - 1978 (2) ELT J-172 (SC); (18) Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CCE - 2006 (205) ELT 700 (T); (19) M. Veerabadhran Vs. CCE - 2005 (182) ELT 389 (T); (20) Durga Trading Company Vs. CCE - 2002 (148) ELT 967 (T); (21) Vikram Cement (P) Ltd. Vs. CCE - 2012 (286) ELT 615 (T); (22) Zenith Fibres Ltd. Vs. CCE - 2014 (302) ELT 423 (T); (23) R.S. Industries Vs. CCE - 2014 (301) ELT 382 (T); (24) Radha Krishna Alloys Pvt. Ltd. Vs. CCE - 2010 (262) ELT 939 (T); (25) Castrol India Ltd. Vs. CCE - 2008 (222) ELT 408 (T); (26) Air Carrying Corporation P. Ltd. Vs. CCE - 2008 (229) ELT 80 (T). 13. In view of above, the ld. Advocate is of the view that the impugned order is not sustainable and is required to be set aside in appeal. 14. Ld. AR supported the impugned order and stated that the shortage has been not only accepted by the appellant but also substantial amount of duty has been paid by them voluntarily either by cash deposit or through adjustment of PLA. The shortage noticed has been accepted by the authorised representative of the appellant including their ....
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....t in fastening the duty on account of shortage of the finished goods, and raw material found during the joint stock verification. It was presumed by the department that since the authorised representative and the Director of the noticee have accepted the shortage and also made voluntary payment the clandestine removal is accepted by them and hence no further proof is required to that effect. Ld. AR has relied upon the various decisions, wherein it has been held that once the shortage is accepted, no further proof is required for the clandestine removal of the goods. But we feel that the same cannot be applied in the facts and circumstances of present case because the assessee is never accepted the shortage as claimed by the Revenue but paid the Central Excise duty to avoid further litigation and coercion. We also find that the department has not conducted any verification at the buyer/supplier's end in spite of having complete address with them. In this regard, we find that the issue regarding clandestine removal on account of mere shortage of the goods have been subject matter of various decisions by this Hon'ble Tribunal. We would like to refer some of them for the adjudication o....
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....e checks at the factory premises of the assessee, found shortage of 9975 kgs. HD as compared to the stock shown in RG-23A, Part-I Register. The Director of the Company admitted the use of the same in the manufacture of water jugs which had been cleared clandestinely without payment of duty. The assessee also debited duty payment of Rs. 1,23,464/- in its Modvat account. Pursuant to the aforesaid, a show cause notice came to be issued to the assessee, which culminated into an order made by the adjudicating authority confirming the duty and the penalty on the assessee and personal penalty of the Director. The assessee as well as the Director carried the matter by filing separate appeals before the Commissioner (Appeals) who vide order dated 15th February, 2008 dismissed the appeals. Both the assessee as well as the Director preferred separate second appeals before the Tribunal, which came to be allowed vide a common order. 7. Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no o....
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....king entries of production and clearance in the statutory records?" 11. From the above settled law, it is clear that in a clandestine removal case, the facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later but there has to be positive evidences like purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge cash transactions to the tune of Rs. 11.23 Crores. When such large number of transactions involving huge amounts are being undertaken in clandestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short or in excess in the factory premises of the appellant o....
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....over, the clearance made against the invoices prior to the date of stock taking, which were not entered in the statutory records were not considered by the lower authorities and merely held that it is an after thought. In fact these things were in records at the time of stock taking but the appellants have also not admitted the shortages but they failed to explain the reasons of shortages during the course of investigation. But in reply to the show-cause notice they have given all the information along with reconciliation statement, which are relevant in adjudicating the case. In the absence of proper explanation and without corroborative evidence of removal of the goods from the factory premises of the appellants, the demand is not sustainable. Moreover, the show-cause notice also alleged that the appellants are not maintaining the statutory records in the manner prescribed under the law. In that event, the clandestine removal cannot be alleged. As it is an admitted fact that the appellants are not maintaining their records as prescribed under the law, they are liable to be penalized under Rule 27 of the Central Excise Rules, 2002. Accordingly, for non-maintenance of statutory acc....
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....is only admitting shortages and there is no admission on the part of the manager in respect of clandestine removal of the same. In such a scenario, the lower authorities have come to a correct finding that such shortages may lead to suspicion but in the absence of any positive and tangible evidence as regards clandestine removal, the allegations cannot be upheld. However it is seen that no mode of weighment stands indicated in the panchnama. There is no inventory on record and no details as to how such a huge quantum was verified by the officers. In these circumstances, the order passed by the lower authorities cannot be faulted upon. The Revenue's appeal is accordingly rejected." 22. We also find in the case of Associated Cylinder Industries Ltd. Vs. Collector of Central Excise - 1990 (48) ELT 460 (Tribunal), it is held as under: "19. We find that there is a lot of force in learned Counsel's pleadings in as much as a comparison between physical stock and RG record could only show that the statutory record was maintained properly or not but it was by itself not sufficient to prove conclusively that clandestine removal was also involved. For establishing such a charge either direc....
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.... 18 are reproduced hereinafter: "16. At this stage, we may refer to certain precedent decisions of the Tribunals. In the case of M/s Golden Steel Corpoation Ltd. V/s Commissioner of Central Excise, Kolkata-II reported as 2017 (347) E.L.T. 570 (Tri.- Kolkata) it was observed that clandestine removal of goods and demand of duty is a serious charge and cannot be held on the basis of the assumption and presumptions. The confirmation of demand on the basis of few documents recovered from the assessee's factory without their being any corroboration from independent sources cannot be held to be sufficient for arriving at the said findings. Similarly in the case of M/s Paragon Extrusions P. Ltd. V/s Commissioner, CGST, Ghaziabad Tribunal vide its Final Order No.72001/2018 dated 24.08.2018 again reiterated the legal position that the clandestine removal findings cannot be arrived at on the basis of some of the statements made and requires independent evidences to prove so. Reference was made to the Hon'ble Allahabad High Court decision in the case of M/s Continental Cement Company V/s Union of India reported as 2014 (309) E.L.T. 411(All.) wherein it was held that clandestine removal is req....