Customs, Excise and Service Tax Appellate Tribunal

Commissioner of Central Excise vs Viraj Industries

MANU/CJ/0036/2024

18.03.2024

Excise

Clandestine removal is a charge and has to be proved with all other concerned activities

In facts of present case, the Appellants are engaged in the manufacture of copper ingots and are availing the exemption under Notification No. 56/2002-CE dated 14th November, 2002 as amended. After conducting an audit of the records of the Appellant, Revenue was of the opinion that, the Appellants have shown production in excess of the capacity or actual production with a view to avail refund of the duty paid. A show cause notice was issued to the Appellant seeking the demand of wrongfully availed self credit. The show cause notice was adjudicated by the impugned order vide which the proposal in the show cause notice was dropped. Committee of Chief Commissioners having review the order have directed the commissioner to file an appeal against the same. Hence, present appeal by Revenue.

The case of the Revenue is that, the Respondents have shown excess manufacture in order to avail excess refund to the tune of Rs. 60 lakhs. All that the Revenue could show as evidence is the consumption of LDO per heat on the basis of test heat conducted by the officers during the course of the audit. Revenue has missed out the fact that consumption of fuel depends on the atmospheric temperature, quality of raw material, condition of the furnace, initial temperature of furnace, per day frequency of the heats and the skill of the labourers.

The consumption of raw material i.e. copper scrap was not analyzed. Even the stock of fuel, raw material and final product was not taken at the time of audit so as to ascertain where the records maintained by the respondents were correct or otherwise. It is very surprising that the clearance of, allegedly excess produced, goods to different parties was not established; not even statement of a single buyer has been recorded; no verification at the transporter's to falsify the claim of the appellants that they have supplied the ingots manufactured by them to others.

Without conducting any such investigation, department cannot establish claim of excess manufacture just by extrapolating the results of study of a single heat or a few heats. Present Tribunal appreciate the department's contention that clandestine removal or removal of excess production cannot be proved with mathematical precision. At the same time, allegations cannot be sustained merely on the basis of a mathematical formula.

The charge levelled against the Respondents is a serious charge. A charge of this nature cannot be summarily proved without conducting any commensurate investigation. It is now a settled principle that, clandestine removal is a charge and has to be proved with all other concerned activities. The arguments of the Revenue are not acceptable and the ratio of the case laws relied upon by the Revenue are not applicable. Appeal dismissed.

Tags : SCN Proposal Dropping of

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