Clandestine Removal

PJ/Case Laws/2011-12/1361

Clandestine Removal - Proof of

Case: BHAWANI SHANKER CASTINGS LTD. Versus CCE, JALANDHAR

Citation: 2009 (92) RLT 583 (CESTAT-Del.)

Issue:- Proof for charge of Clandestine removal – High Consumption of electricity but no other evidence supporting the charge – charge not sustainable.

Brief Facts:- Appellant is a manufacturer of M.S. Ingots. For the period 13.4.2000 to 31.07.2000, the officers found that as per the data of electricity consumption from the Mobile Meter Testing Squad (MMTS) Wing of Punjab State Electricity Board, the appellant has used electricity highly disproportionate to the production of M.S. Ingots accounted by them.

Accordingly, the Original Authority concluded that there was suppressed quantity of production of 422.794 M.T. of ingots valued at Rs.46, 39,734/- and held the same to have been clandestinely removed and accordingly, demanded duty with interest and imposed penalty.

The said order has been upheld by the Commissioner (Appeals). Hence, appellant is before the Tribunal.

Appellant’s Contention:- Appellant submitted that the main raw material for the manufacture of M.S. Ingots is scrap and no discrepancy in stock of scrap was noticed; no allegation of excess procurement of scrap was made; no evidence indicating use of excess labour, other raw materials was relied upon; no discrepancy in the stock of finished goods noticed; no evidence of any clandestine removal of the finished goods have been relied upon; being summer period, they were using air-conditioners, air-coolers and other appliances, which consumed lot of electricity. The Department did not provide the meter reading indicating alleged excess use of electricity.

Reasoning of Judgment:- The Tribunal held that there is allegation that electricity consumption is highly disproportionate to the production recorded. The Tribunal noted that no other evidence to substantiate the unaccounted production of steel ingots and clandestine removal of the same have been relied upon. The statement taken from the Authorised Signatory merely refers to the time required for completion of "a heat", which is reportedly between 2.45 hours to 3 hours.

It was noted that no other investigation on the relevant issues appears to have been taken. In reply to the show cause notice, the appellant has contested the charges and submitted that the production depends upon number of factors namely type of raw materials used, labour employed, break-down in machinery, erratic supply of electricity, etc.

The alleged quantum of electricity raises serious doubt in our mind also about the quantum of production recorded. The use of such excess quantity of electricity is being disputed by the appellant and they claimed that no meter reading to substantiate the same has been relied upon.

It was held that there is no other evidence to indicate suppression of production and clandestine removal. The charge of suppression of production and clandestine removal is a serious one and could not be upheld on a mere alleged use of excess electricity, which has also been contested by the appellant. Impugned order being unsustainable is set aside.

Decision:- Appeal allowed with consequential relief.

Comment:- This issue has been settled by the Tribunals as well as many High courts. But the department is keeping on issuing such type of demands without proper investigation and only on consumption of electricity. Consequently, such type of demands are dropped. But the assessee faces the harassment by facing such huge demands. But there is no accountability on the part of officer. Even if the cost of litigation is put on head of officer in such cases, they will stop issuing demands.

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PJ/Case Laws/2011-12/1361

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