Duty demand for clandestine removal cannot be confirmed on the basis of eye estimation at the time of physical verification.

PJ/Case Law/2013-14/1689

Case:-SWAROOP CASTING P. LTD. Versus COMMISSIONER OF C. EX., MEERUT-I

Citation:-2013 (290) E.L.T. 392 (Tri.-Del.)

Brief facts:-The appellant is engaged in the manufacture of MS Ingots falling under Chapter 72 of the First Schedule of Central Excise Tariff Act, 1985. Their factory was visited by Central Excise Officers on 4-1-2008, who conducted physical verification of the stock of finished goods as also raw material. As per the Panchnama drawn on spot, there was shortage of Runner and Riser to the extent of 3.72 MT involving duty of Rs. 10,421/-, shortage of Sponge Iron as also Pig Iron which is raw material of the appellant was also found involving duty of Rs. 85,000/- and Rs. 72,000/- approximately. The appellant’s authorised representative in his statement accepted such shortages. On the above basis, proceedings were initiated against the appellant for confirmation of demand of duty of Rs. 1,67,801/- which culminated into an order passed by the original adjudicating authority confirming the demand and imposition of penalty. The said order was upheld by Commissioner (Appeals). Hence the present appeal.

Appellant’s Contention:-The appellant’s contention is that duty demand cannot be held on the basis of shortages in the final products as also in the raw material. They specifically contended that there was no actual weighment of raw material and the shortages detected were only on eye estimation basis. The said plea of the appellant stand rejected by the authorities below on the ground that the appellant has accepted the said shortages.

Respondent’s Contention:-The counsel appearing for the revenue reiterated the submissions of the adjudicating authority.

Reasoning of Judgment:-After hearing both the sides, Tribunal finds that the issue to be decided in the present appeal is as to whether the statement accepting the shortages can be held to be a conclusive proof of actual shortages. There is nothing in the Panchnama to show that all the stock of the appellant was actually weighted. No inventory of weighment has been made by the appellant. Further, it is noted that the statement only accepts the shortages as recorded in the Panchnama and there is no acceptance to the effect that such goods were cleared clandestinely. He also added that Tribunal in the case of Nilesh Steel & Alloys P. Ltd. reported as 2008 (229)E.L.T.399 (Tri.-Mum.)has held that such shortages detected on eye estimation basis cannot be held to be conclusive proof of clandestine removal. To the same effect is the decision of the Tribunal in the case of UP Alloys P.Ltd. reported as 2007 (213)E.L.T.412 (Tri.-Del.).It was held that in as much as no actual weighment was done in respect of loose sponge iron lying in the factory, shortages cannot be held to be actual. By following the ratio of above decisions as also by observing that the charges of clandestine removal cannot be upheld on mere shortages, Tribunal sets aside the impugned order and allows the appeal with consequential relief to the appellant.

Decision:- Appeal Allowed.

Comment:-The crux of this case is that for confirming demand under clandestine removal, proper corroborative evidences are required and mere eye estimation without carrying out any weighment and confessional statements cannot be the sole basis for proving clandestine removal.

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PJ/Case Law/2013-14/1689

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