Whether difference in stock in Daily Stock Account and ER-1 sufficient to prove clandestine removal?

PJ/CASE LAW/2016-17/3100

Case:-SALTS & CHEMICALS PVT. LTD. VERSUSCOMMISSIONER OF C. EX., KOLKATA-IV

Citation:-2016 (331) E.L.T. 449 (Tri. - Kolkata)

Brief Facts:-Briefly stated the facts of the case are that during the period from June, 2010 to September, 2010, there was mismatch between the Opening Balance (OB) and Closing Balance (CB) of the figures shown in the ER-I returns. On the basis of this difference in the figures, a show cause notice was issued demanding the duty on the differential quantity as reflected in ER-I returns alleging clandestine clearance of the same without payment of duty. The adjudicating authority confirmed the demand. Aggrieved by the said order, the appellant preferred an appeal before the ld. Commissioner (Appeals). The ld. Commissioner (Appeals), in turn, upheld the order of the adjudicating authority and dismissed the appeal filed by the appellant. Hence, the present appeal.

Appellant contentions:- The ld. advocate, appearing for the appellant, submits that on switching over from the manual system of maintenance of records/accounts to computerization, in the month of May, 2010, there was mistake in entering the data relating to opening and closing balance stock in the case of three items, namely,
(i)            Duraphos Rustokik, etc.;
(ii)           Phoschem Phosbond, etc.; and
(iii)          Phoschem Phosbond,
It is the submission of the ld. advocate that the opening and closing balance were shown correctly in the Daily Stock Account, however, inadvertently, there was error in showing the same ER-1 returns filed with the Department for the respective months. It is his submission that mere clerical mistake recording in the OB & CB of Stock in the ER-I returns cannot be construed as clearance of goods without payment of duty. In support, he has referred to the judgments of this Tribunal in the cases of CCEx., Ludhiana v. Renny Steel Castings - 2011 (274) E.L.T. 94 (Tri.-Del.), R.K. Patel & Co. v. CCEx. - 2008 (227)E.L.T.558 (Tri.-Mumbai) & Hilton Tobacco v. CCEx., Hyderabad - 2005 (183)E.L.T.378 (Tri.-Bang.).

Respondent contentions:-The ld. AR appearing for the Revenue, has reiterated the findings of the ld. Commissioner (Appeals).

Reasoning of Judgment:-Heard both sides and perused the records. Tribunal find that the ld. Commissioner (Appeals) has simply upheld the order of the lower authority without recording reasons. From the records and submissions advanced by the ld. advocate for the appellant, Tribunal find that the allegation of clandestine removal rests on the discrepancy in the figures of OB & CB of Stock mentioned in the monthly ER-1 returns relating to manufacture and production of only three items, namely,
(i)            Duraphos Rustokik, etc.;
(ii)           Phoschem Phosbond, etc.; and
(iii)          Phoschem Phosbond,
There is no difference between the OB and CB in DSA for June & July, 2010 and also for August & September, 2010. It is their claim that due to inadvertence, while filing ER-1 returns, CB & OB have not matched for the said periods. On a careful analysis of the aforesaid discrepancy, Tribunal find force in the contention of the ld. advocate for the appellant. Tribunal find that there is no discrepancy noticed by the Department in the Daily Stock Accounts in recording the OB & CB of Stock in relation to the said items. However, while recording the figures in ER-1 returns, there could be possibility of writing error in entering the data relating to OB and CB of the said items due to switching over from manual system of maintenance of records to computerized system. Tribunal find force in the contention of the ld. advocate that if there was an intention to clear the goods clandestinely, then the appellant would not have maintained different figures of the Stock in the DSA and ER-1 returns. Besides, except the said errors in recording the CB & OB in the respective ER-1 returns, the Department has not adduced any other evidence in support of clandestine removal. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.

Decision:- Appeal allowed.

Comment:- The gist of the case is that mere difference in opening stock and closing stock mentioned in Daily Stock Account and the ER-1 returns cannot lead to charge of clandestine removal. When there is no discrepancy noticed by the department in the daily stock account in recording the OB & CB of stock in relation the said items, it could be possible that there was error in entering the data. If there was intention to clear the goods clandestinely, then the appellant would not have maintained different figures of the stock in DSA and ER-1 returns. Also department has not adduced any other evidence in support of clandestine removal. Hence, appeal was allowed as charge of clandestine removal is grave and is required to be proved with cogent and corroborative evidences.

Prepared By: Anash kachaliya

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PJ/CASE LAW/2016-17/3100

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