Whether the charge of the suppressed production and clandestine removal of goods can be sustained merely on the basis of the production pattern of other assessee in the absence of any other Corroborative evidence?

PJ/Case Law/2020-2021/3648

Case: - M/s Shri Durga Cables Pvt. Ltd.

Citation: -Decision dated 02^nd January 2020

Issue:
Whether the charge of the suppressed production and clandestine removal of goods can be sustained merely on the basis of the production pattern of other assessee in the absence of any other Corroborative evidence?

Brief Facts:

The assessee is engaged in manufacture of aluminium electric wires and cables, aluminium conductors and PVC compounds on which Central Excise duty is being paid - Major input used in the manufacture of final product is aluminium wire rod - On the basis of investigation, a SCN was issued wherein it was alleged that the assessee had received huge amount of inputs i.e. aluminium wire rods, on which they have availed Modvat credit but, however, they have not accounted the final products which could be manufactured from the said inputs and thus they had clandestinely removed the said unaccounted final products without payment of Central Excise duty.

Applicant’s Contention:
The applicant has submitted that department has applied the production pattern pertaining to NIICO India Ltd. to arrive at the conclusion that input-output ratio would be 1:1. They said that the ration cannot be applied as they are a SSI Unit and there might be difference in the production process. Further no corroborative evidence have been produced to show that there is clandestine removal of goods neither any statement of buyer of transporter has been produced. Moreover reliance has been placed on the following judgements

Continental Cement Co. Vs. UOI 2014 (309) ELT 411 (AII)
Premier Packaging Vs. Collector
Brindavan Beverages (2007) 5 SCC 388 (SC)

Reasoning of Judgement:

It was held that in the entire proceedings no evidence, much less corroborative evidence, has been adduced to show that input goods have been procured to manufacture goods for clandestine clearance. No evidence for extra production or unaccounted cash or statement of buyers or transporters has been obtained. It is a settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing some evidence. The Tribunal has taken consistent view that in absence of corroborative evidence, the charge of clandestine clearance cannot be levelled against the assesse. The whole basis of applying the input output ratio of 1:1 to arrive at the quantity of final products alleged to be clandestinely cleared by assessee is solely based on the production pattern of other assessee in the same Commissionerate. The Commissioner made a fundamental error in making such assumption to raise the demand on allegation of clandestine clearance - In the case of R. A. Castings Pvt. Ltd., the Tribunal held that demand raised on the basis of electricity consumption as per technical Report given, it was not sufficient to hold that excess goods might have been manufactured by assessee which could have been clandestinely removed without payment of duty. No shortage of goods were ever found which fact is on record and not in dispute - In any case, since the whole basis of allegation of clandestine removal is the production pattern of other assessees, which has no legal or scientific basis, the impugned duty demand cannot be sustained.

Decision:Appeal has been allowed and the impugned order has been set aside.

Comment:- Revenue has mainly relied on the production pattern and electricity consumption of the applicant, but apart from these many factors are to be kept in mind in order to determine the clandestine removal of excisable goods like

Receipt of raw material inside the factory premises and non accountal thereof in the statutory books
Utilisation of such raw material for clandestine manufacture of finished goods
Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used and discrepancy in the stock of raw materials and final products.
Entry of vehicle in the factory premises, loading of goods, transporters documents, forms of Commercial Taxes department and receipt by the consignees.
Receipt of sale proceeds and amount received from the consignees.

As the revenue was unable to prove that there was clandestine removal of goods which is the duty of department the judgement has been passed in favour of the applicant.
The charge of clandestine removal is serious charge and it should be proved with cogent and corroborative evidences.

Comments

PJ/Case Law/2020-2021/3648

Post a Comment

Query