Clandestine Removal - Onus to prove charge

PJ/Case Laws/2012-13/1088

Case: GUJARAT SETHCO CLUTCH LTD. Vs UNION OF INDIA

Citation: 2012 (278) ELT 160 (GUJ)

Issue:- Clandestine removal – Onus on assessee to establish that excess finished goods were defective goods returned for repair and not clandestinely manufactured by leading cogent evidence.

Brief Facts:- Appellant-company manufactures clutch plates, clutch assemblies and components thereof, which are liable to excise duty. The department visited the factory premises of appellant and during routine check found that certain finished goods lying in the factory did not tally with the daily stock account register. The explanation of appellant that the goods were returned by M/s. Telco Limited was not found acceptable and after drawing a Panchanama the goods were ordered to be put under seizure. After investigation, show cause notice dated 30-9-2003 was issued.

The Adjudicating Authority passed an order on 28-10- 2004 confirming the demand with interest and also imposed penalty of equivalent amount. In appeal, the Tribunal the two members recorded dissenting opinions. Member (Judicial) agreed with the submissions of the appellant while Member (Technical) agreed with the respondent authority. Matter was referred to Third Member upon such difference of opinion in the following terms: -

- Whether denial of Modvat credit of Rs. 59,6,244/- along with interest and penalty of equivalent amount imposed upon appellant has to be upheld as recorded by learned Member (Technical) or the same has to be set aside, as observed by the Member (Judicial)?

- Whether penalty of Rs. 5 lakhs imposed under the provisions of Rule 25 of Central Excise Rules has to be set aside, as held by the Member (Judicial), but not considered by Member (Technical)?

- Whether the confiscation of the seized excess found goods has to be set aside, as held by Member (Judicial) and not considered by Member (Technical)?

The third Member agreed with the Member (Technical) in relation to the denial of CENVAT Credit of Rs. 59,46,244/- and also confirmed the penalty of equivalent amount. The Bench of Tribunal thereafter passed an order on 10-9-2007 reported at 2008 (229) E.L.T. 137 (Tri.-Ahmd.) as per the majority opinion.

Hence, appellant is before the High Court raising the following questions of law:

1. Whether when once dispatched and re-entry of the goods is established on record in the facts of the present case then any limitation or delay could be invoked under the provisions of Rule 16 of the CENVAT Credit Rules, 2002 in return of goods to deny such credit?

2. Whether CENVAT Credit can be denied to the appellants on re-entry of goods assuming procedural infractions once the substantive dispatch and re-entry of goods is admitted?

3. Whether CENVAT Credit can be denied on mere presumptions and assumptions?

Appellant’s Contention: - Appellant contended that firstly the onus had wrongly been cast on them that whether goods were clandestinely removed or not, had to be established by respondent authority. Secondly, it was contended that there was no evidence on record to hold against the appellant that they had indulged in any clandestine removal of goods and the inferences drawn by the respondent authority and the members of the Tribunal constituting majority were not supported by the evidence on record. It was submitted that considering the evidence on record, no reasonable person could have come to the conclusion arrived at by the respondent authority as confirmed by the majority opinion of members of Tribunal.

Appellant further submit that it is an accepted fact that for the period of July, 2001 to March, 2002, the appellant availed CENVAT Credit on 263 invoices. That under those very invoices finished goods were removed from the factory of the appellant, duty paid thereon and dispatched to M/S. Telco Limited. However, M/s. Telco Limited rejected the goods as being defective and hence the goods were returned and in terms of Rule 16 of the CENVAT Credit Rules, 2002, the appellant credited the duty originally paid. That the said credit was utilized for clearance of another lot of goods but there was no evidence, either to show that the goods had not been returned by M/s. Telco Limited, or that while clearing the second lot of goods, there was any clandestine production or clandestine removal. That even the diversion of finished goods alleged by the respondent authority was not established. It was submitted that the statement of the Transporter with whom the appellant Company had dealings was misread and mis-appreciated by the respondent authority and the majority members of the Tribunal. Appellant therefore, pleaded that, in fact, the entire matter had proceeded on surmises and conjectures in absence of any cogent evidence in support of the case sought to be made out by the respondent authority. Hence, the issue in question gave rise to a substantial question of law which was required to be considered by this Court.

Reasoning of Judgment:- The High Court noted that the majority of the members of the Tribunal concluded that the order of denial of CENVAT Credit along with levy of interest and equivalent penalty is justified, on the basis of finding of facts. That appellant has availed of Cenvat Credit to which they were not entitled. The onus was on the appellant to prove that the goods were returned goods but they have not produced any evidence to prove the same. It was found later on that M/s Telco Limited had never rejected and returned the said goods as the said firm had always issued debit notes for rejection of such goods.

Considering the facts of the case as found by Tribunal, the High Court noted that it is apparent that the issue revolves round appreciation of facts. It is not possible to state that this is a case of no evidence, nor is it possible to state that irrelevant factors have been considered by the Tribunal and relevant factors ignored. In the circumstances, even if another view different from the one recorded by Tribunal is possible on the evidence on record that by itself would not give rise to any substantial question of law so as to warrant interference. Accordingly, in absence of any question of law, as proposed or otherwise, much less a substantial question of law, appeal is dismissed.

Decision:- Appeal dismissed.

Comment:- The matter can be referred to High Court when the question is related to question of law. The matter of factual position cannot be taken up in High Court. This principle is followed by High Court in this decision. The High Court maintained that although the decision can be changed by considering factual position but they cannot do so. It has to be decided on law points only. There is legal point in the instant case.

Comments

PJ/Case Laws/2012-13/1088

Post a Comment

Query