Onus To Prove Charge Of Clandestine Clearance Of Goods Lies On The Department: CESTAT

The two-member bench, P.K. Choudhary (Judicial Member) and Raju (Technical Member), have held that the charge of clandestine clearance of goods is a serious charge and cannot be made on presumptions and assumptions.

The assessee is engaged in the manufacture of sponge iron falling under Central Excise Tariff 7203 on which applicable central excise duty is being paid. An enquiry was initiated at the factory premises in which the records maintained by the assessee, viz., daily stock account, raw materials register, and central excise returns, were scrutinised. It was found that the consumption of iron ore and electricity used for the manufacture of a final product, i.e., sponge iron, was comparatively high as against the one disclosed by the appellant in their monthly central excise returns. Relying on some reports obtained by the Central Excise Department from M/s. Popuri Engineering & Consultancy Services, Hyderabad and M/s. Industrial Technical Consultant, Raipur, an average input output ratio was formulated and compared with the actual production of the appellant. The difference in the quantity of final product, i.e., sponge iron, was assumed to be unaccounted for, for which a Show Cause Notice was issued to propose a central excise duty demand.

In the course of adjudication, the Appellant made a detailed submission justifying the reason for the shortfall in the production quantity. The appellant submitted that the reports relied upon by the Central Excise Department could not be made the basis to allege clandestine manufacture and removal of excisable goods in the absence of any corroborative evidence. Without appreciating the submissions, the notice was adjudicated by the Commissioner, and he confirmed the duty demand along with interest and penalty as proposed in the notice.

The Appellant submitted that the demand was made on the basis of estimated production and not actual production. The reports relied on by the authorities are extraneous in nature, which cannot be made the basis to allege the serious charge of clandestine manufacture and removal without any corroborative evidence.

The department contended that the appellant had clandestinely cleared the goods without payment of duty.

The CESTAT found that there was no corroborative evidence to show that there was production and clearance of the quantity of final products that had been arrived at in the notice by comparing the external reports and the quantity of production disclosed by the Appellant in their excise returns.

The tribunal observed that no statements of the driver of the vehicle or the owner of consignments are on record, nor is there any clue as to whether any proceedings have been taken subsequent to the alleged seizure.

Case Title: M/s. Shree Hari Sponge Private Limited Versus Commissioner of Central Excise & Service Tax, Bhubaneswar-II

Citation: Excise Appeal No.76329 of 2014

Date: 31.08.2022

Counsel For Petitioner: Advocate Kartik Kurmy

Counsel For Respondent: Authorized Representative J.Chattopadhyay

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