Issue :
The issue involved in the present appeal is whether Shortage of Final Goods and Statements admitting shortages can be basis for concluding Clandestine Removals .
The tax litigation of M/s Sabero Organics Gujarat Ltd was handled by Shri Anand Mishra, Advocate,Amlegals .
Held :
…..the shortage of finished goods by itself could not, unless it is related to clandestine removal of finished goods for which there was no material evidence, infer evasion of Excise duty. It is also an established law that any presumption, howsoever strong, cannot take the place of an evidence
…….Investigation in the present case has not established that shortages found in fact were cleared clandestinely by the appellant. There is no confessional statement of the appellant that shortages were cleared clandestinely without payment of duty. Shortages found in the stocks could be a good ground for raising suspicion but it should be corroborated by the confessional statement of the assessee and/or other evidences that such shortages were clandestinely removed also. There is also no evidence of seizure of any goods clandestinely cleared by the appellant
The entire order is reproduced herein below :
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,West Zonal Bench, Ahmedabad
Appeal No. : E/326/2010, E/11270/2013
(Arising out of OIA-KRS/414/VAPI/2009 dated 30.11.2009 and OIA-SRP/273-275/VAPI/2012-13 dated 21.02.2013, Passed by Commissioner (Appeals) Central Excise, & S.T., Vapi)
M/s. Sabero Organics Gujarat Limited : Appellant (s)
VERSUS
Commissioner of Central Excise & S.T., Vapi : Respondent (s)
Represented by :
For Appellant (s) : Shri Anand Mishra, Advocate
For Respondent (s) : Shri S.K. Shukla, Authorised Representative
CORAM :
Mr. H.K. Thakur, Honble Member (Technical)
Date of Hearing / Decision : 29.06.2015
ORDER No. A/10894-10895/2015 Dated 29.06.2015
Per : Mr. H.K. Thakur;
Appeal No. E/11270/2013 has been filed with respect to OIA No. SRP/273-275/VAPI/2012-13 dated 21.02.2013. Brief facts are that a search was undertaken by the officers of Central Excise in the factory premises of the appellant on 11/12.09.2006 and Panchnama was prepared, during which shortage of certain finished goods was found. Shri Rajesh R. Patel, Excise Executive and Authorised Signatory of the appellant in his statement dated 12.09.2006 stated that shortages found may be on accounting error with no clandestine intention to evade payment of duty and that he is not able to explain the shortages. It was also submitted that appellant is reversing the duty voluntarily in good faith with a scope to explain the same.
2. Appeal No. E/326/2010 has been filed by the appellant with respect to refund of Rs. 11,40,458/- paid during investigation. The said refund claim was returned to the appellant as premature as per order dated 09.09.2009 of the adjudicating authority. On an appeal, Commissioner (Appeals) vide order dated 13.11.2009, issued on 04.12.2009 also dismissed the appeal of the appellant by upholding OIO passed by the adjudicating authority.
3. Shri Anand Mishra (Advocate) appearing on behalf of the appellant argued that there was no confessional statement of Shri Rajesh R. Patel, Excise Executive and Authorised Signatory and appellant disputed the duty alleged to have been evaded and the same was paid in good faith with scope to explain the shortages. Learned Advocate made the Bench go through the correspondence exchanged between the appellant and the department through letters dated 16.09.2006, 19.08.2009 and subsequent statement dated 11.08.2009 of Shri S.R.B. Nair, Chief Operating Officer and Director of the appellant, wherein he explained the shortages. It was the case of the appellant that the shortages detected by the officers of Central Excise during their visit on 11/12.09.2006 could not explain at that moment but there was no clandestine manufacture and removal. That the first appellate authority has simply brushed aside their arguments as an after thought. Learned Advocate also relied upon the final order No. A/11237/2013-WZB/AHD dated 27.09.2013 (Appeal No. E/2652/2004-SM) passed by this Bench in the case of Zenith Fibres Limited vs. CCE, Vadodara. He made the Bench go through Para 6 of this order to argue that a case of clandestine removal can not be based solely upon the statement, which can also not be said to be a confessional statement given by the appellant.
4. Shri S.K. Shukla (AR) appearing on behalf of the Revenue argued that the statement given regarding shortages of finished goods and later explanation given has to be considered as an afterthought. He relied upon the case law of Majestic Auto Limited vs. CCE, Ghaziabad [2004 (172) ELT 391 (Tri. Del.)].
5. Heard both sides and perused the case records. The issue involved in the present proceedings is whether the case of clandestine removal can be held to be established on the basis of statement dated 12.09.2006 of Shri Rajesh R. Patel, Excise Executive and Authorised Signatory of the appellant. There is no other corroborative evidence or statement given by any other person to substantiate that there was any clandestine removal on the part of the appellant. It has been rightly pointed out by the learned advocated appearing on behalf of the appellant that this statement only talks about payment of an amount voluntarily made in good faith with a scope to explain the shortages. By a letter dated 16.09.2006 appellant, within a weeks time of Panchnama, explained the department that there was no shortages as several materials are lying spread over everywhere in the factory premises, which are rejected as well as returned goods. No verification was made during investigation with respect to the claim made by the appellant. During subsequent investigation conducted, by recording statement dated 11.08.2009 of Shri S.R.B. Nair, Chief Operating Officer and Director of the appellant, also explains the case of the appellant that there was no shortage of finished goods.
6. It is now well understood legal proposition that a case of clandestine manufacture and removal can not be based only on a few confessional statements. In the present case, there is even no confessional statement of the appellant, because the very first statement at 12.09.2006 convey that duty was paid voluntary in good faith with a scope to explain shortages later. Rather the shortages detected during the visit of the officers of Central Excise were intimated as non-existing by a letter within a week from the date of visit. To reject the appellants claim of no shortage of finished goods, a verification ought to have been done immediately. Learned AR relied upon the judgment of Majestic Auto Limited vs. CCE, Ghaziabad where the explanation was offered after two months and after physical verification by the department, was held to be inadmissible. In the case relied upon by the AR, the commodity involved was two wheelers, Scooters and Mopeds, and the quantity of which was easily verifiable during stock taking. On the other hand, in the present case, the shortages were alleged to be that of chemicals when the shortage where it was not found admitted but a statement was given that the shortage will be explained later and the same was explained by the appellant during subsequent investigations. In the absence of any other independent corroborative evidence and after perusal of the case records it is to be held that shortages and clandestine removal of the finished goods are not established and are solely based on presumptions and assumptions. This very Bench in the case of Zenith Fibres Limited vs. CCE, Vadodara held as follows:-
6. In the light of the above law laid down by the Apex Court, it has to be seen whether the ingredients of Section 11AC are satisfied in the present case or not. It is the case of the appellant that they have only admitted the shortages and the same could be as a result of accumulated losses over a period or for any other reason. It was argued by the appellant that they have never cleared these shortages clandestinely. Investigation in the present case has not established that shortages found in fact were cleared clandestinely by the appellant. There is no confessional statement of the appellant that shortages were cleared clandestinely without payment of duty. Shortages found in the stocks could be a good ground for raising suspicion but it should be corroborated by the confessional statement of the assessee and/or other evidences that such shortages were clandestinely removed also. There is also no evidence of seizure of any goods clandestinely cleared by the appellant. Appellant has relied upon a series of judgments, one of them being of Allahabad High Court, as indicated in Para 3 above, wherein it has been repeatedly held that the shortage of finished goods by itself could not, unless it is related to clandestine removal of finished goods for which there was no material evidence, infer evasion of Excise duty. It is also an established law that any presumption, howsoever strong, cannot take the place of an evidence.
7. In view of the above observation, appeal filed by the appellant is allowed with consequential relief if any. Appeal No. E/326/2010 filed by the appellant also stands disposed of.
(Order dictated and pronounced in the Court)
(H.K. Thakur)
Member (Technical)
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