By TIOL News Service

NEW DELHI, DEC 31, 2013: AROUND 17 years ago, preventive officers of the department visited a unit and conducted physical stock verification. The officers found shortage of raw materials. Statements were recorded and inquiries were conducted at the buyer's end. Consequently, duty was demanded on clandestine removals by applying input/output ratio. On appeal, the Commissioner (Appeals) confirmed a demand of Rs 38,143/- (out of total demand of Rs 6 ,65,309 /-) and reduced penalty to Rs 10,000/- and Rs 5,000/- on the Director of the company. Aggrieved by the order of Commissioner (Appeals), revenue is before the Tribunal.

The Member (J) held that revenue appeal has no merit by observing:

On going through the impugned order of Commissioner and the grounds of appeal, we find that the Revenue has again reiterated their stand taken before the original adjudicating authority and have submitted that inasmuch as clandestine clearance of 11.056 MT of casting stand established even from the order of Commissioner (Appeals), it is to be presumed that they are indulging in clandestine activities and shortage of raw materials should be held as having been converted into the final product, cleared clandestinely. In fact, we find that while framing the issue, the Revenue, in their memo of appeal have themselves mentioned that the raw material found short is presumed to have been used in the manufacture of final product, removed clandestinely. Apart from the so called shortages of raw materials, we find that there is no evidence on record establishing conversion of raw material into final product and clearance of final product.

In the present case, apart from the shortages, which appellant has disputed on the ground that the same was calculated on eye estimation and no actual weighment was conducted, we find that there is no other evidence reflecting upon the clandestine removal of huge quantity of 170.592 MT alleged by the Revenue to have been manufactured by the appellant.

However, the Member (T) differed with the above view and observed:

This is a case of alleged clandestine manufacture and clearance of excisable goods on the basis of the following evidences:

(i) Shortage of physical stock of raw material as compared to accounted stock on the date of surprise verification;

(ii) Certain loose sheets of paper recovered from the factory; The Accountant of the factory stated initially that it was written by Shri . P. S. Gehlot , Production supervisor;

(iii) Unwillingness on the part of Shri . Gehlot to join investigation initially; He joined proceedings later and stated that the loose sheets were not written by him; but he admitted that some of the goods cleared to one of the buyers namely, Sneh Sales Corporation were cleared without payment of duty and the said fact was confirmed by the Director of the company.

(iv) Admission by Sneh Sales Corporation that they received certain goods which were not covered under invoices and they paid sale value of such goods in cash;

(v) Report from the Chief Manager of State Bank of India addressed to the Respondent seized from the files of the Respondent stating that they were not depositing sale proceeds in banks.

With regard to the use of word “Presumed” by the department, the Member (T) held:

I do not agree with the argument that a case has to be decided based on a word or sentence used in the appeal memorandum or during the argument. After all English is still a foreign language to most Indians and the departmental officers are not legal pundits . I am of the view that the case has to be decided on the basis of facts of the case and the depending on the answer to the question whether the charge is proved on the basis of evidence available. Further it is seen that the word "presume" is not blasphemous to the scripture of law.

In view of the difference of opinion, the matter was referred to the Third Member who concurred with the Member (T) by holding inter alia:

Findings record by learned Technical Member has legs to stand having been based on cogent evidence and preponderance of probability but not on any presumption which is fortified from the finding by bank officials. Ratio laid down in the case of Alagappa Cement Pvt. Ltd. vs. CEGAT, Chennai reported in (2010-TIOL-770-HC-MAD-CX) and CCE vs. International Cylinders Pvt. Ltd. reported in 2010 (255) ELT 68 (H.P.) is applicable to the present case. It may be stated that any construction contrary to the ratio laid down by these Judgments shall be bonus to evaders and encouragement of evasion of public Revenue, which is a social evil. Therefore, it can irresistibly be concluded that decision of learned Technical Member is based on cogent and credible evidence as well as preponderance of probability upholding duty demand of Rs.6,65,309/- and penalty.

Accordingly, by majority order, the Tribunal allowed the appeal by Revenue.

(See 2013-TIOL-1932-CESTAT-DEL)