Whether clandestine removal can be alleged merely on the basis of monthly stock statement submitted by the assessee to their bank?

PJ/Case Laws/2012-13/1425

Case: JASMINE PAINTS V/S COMMISSIONER OF CENTRAL EXCISE, ROHTAK

Citation: 2013(287) E.L.T. 239 (Tri.-Del.)

Brief Facts: - The appellant firm is a manufacturer of paint. Shri Sudhir Mehta is the Proprietor of the appellant firm. During the period of dispute, they were availing Cenvat credit in respect of inputs used in or in relation to manufacture of their final product. The department’s allegation is that in course of audit of the records for the period 2006-2007 to 2009-2010 in the month of June 2010, it was found that in the RG-23A Part-I, while they were showing nil opening as well as closing stock during same month, as per the monthly stock statement submitted by them to the bank some quantity of inputs was shown as the opening as well as closing stock. It was also found that for some periods the quantity of inputs received in the factory as shown in RG-23A Part-I register did not tally with the receipt of raw material as shown in the bank statement for those periods. On this basis, the department has alleged that during the period from April 2006 to December 2006, the appellant have removed clandestinely the Cenvat credit availed inputs without reversal of the credit or without payment of an amount equal to the Cenvat credit. On this basis, after issue of show cause notice, the Jurisdictional Commissioner vide order-in-original dated 4-4-2012 confirmed the demand of Cenvat credit of Rs. 54,34,152/- against appellant firm along with interest and while penalty of equal amount was imposed on the appellant firm under Rule 15(2) of Cenvat Credit Rules, 2004, penalty of Rs. 50,000/- was imposed on Shri Sudhir Mehta, Proprietor of the appellant firm. Against this order of the Commissioner, these appeals along with stay applications have been filed. Though these matters are listed for hearing of stay applications only, after hearing both the sides, it was found that the appeals themselves can be taken up for final disposal. Accordingly, the requirement of pre-deposit is waived and the appeals are heard for final disposal.

Appellant’s Contention: - The appellant submits that impugned order is not sustainable for the reason that the Jurisdictional Commissioner has come to the conclusion of clandestine removal only on the basis of monthly stock statement submitted by them to their bank, that beside this, there is no evidence of clandestine removal, that the department has neither examined any buyer nor they have examined the invoices issued during the disputed period to find out how much inputs could have been used for manufacture of the final product cleared during the disputed period, that even the discrepancy regarding stock position in RG-23A Part-I statements and the bank statements was explained by them in their statement dated 30th March 2011, wherein he explained that the stock of inputs were shown in monthly bank statements for availing more credit from the bank against hypothecation of the stock position and that even if they were resorting to this malpractice for availing the higher credit facility, this by itself, in absence of any other evidence cannot be taken as the proof of clandestine removal of cenvated inputs without the payment of excise duty. Thus, the condition of pre-deposit is to be waived and appeal should be allowed.

Respondent’s Contention: - The respondent contends that the appellant during the period of dispute had removed cenvated inputs without reversal of the Cenvat credit and the demand has been correctly confirmed against them. He, however, fairly conceded that but for discrepancy in the monthly bank stock statements vis-à-vis RG-23A Part-I, there is no evidence worth name on the record to show clandestine removal of cenvated inputs without payment of excise duty.

Reasoning of Judgment: - The Hon’ble Tribunal held that the only basis of the demand raised against the appellant is that while in some cases, in the monthly statements to bank regarding stock of raw material, the appellant were showing some stock in the RG-23A Part-I register there was nil stock in other cases, the stock of cenvated inputs reflected in RG-23A Part-I register was less than the stock of inputs reported in statements to the bank. Further they held that other than this discrepancy, there is absolutely no evidence of removal of the cenvated inputs to anybody. For the entire period of dispute, there is no evidence that the officers had conducted physical stock taking of the cenvated inputs and had detected shortage in respect of the same. In view of this, the case against the appellant is not sustainable.

Decision: - The appeal was allowed.

Comment:-This is yet another case wherein clandestine removal was alleged solely on the basis of discrepancy in the stock statement submitted to the bank and the RG-23 A Part-1 register without any cogent and corroborative evidence of shortage of stock during physical verification etc.

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PJ/Case Laws/2012-13/1425

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