Allegation of Removal of Clandestine Without Corroborative Evidence is not Valid: CESTAT [Read Order]

The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the allegation of removal of clandestine without corroborative evidence is not valid.

M/s. Encop Wires Private Limited, the appellants are engaged in the manufacture of copper wire and super enamelled copper wire falling under Chapters 74 and 85 of the CETA, 1985. They avail CENVAT credit on the inputs, input services and capital goods under the relevant rules. 

During an audit of their records in 2014, it was noticed that they purchased goods and later sold the same without payment of duty.  The appellant explained that the goods were purely traded without bringing into their factory for which permission has been sought from time to time to undertake trading activity from their factory, to which, no response was received from the Department. But the audit party was of the opinion the Copper wires were cleared from the factory in the guise of trading.

On completion of the investigation by the Preventive Department, in its report, it endorsed the view of the Audit party. It was alleged that during the period from March 2012 to March 2013, the appellant had though claimed to have purchased a total quantity of 10.094 MTs of copper wire from one M/s. Mech Industries Pvt. Ltd., Bangalore and 13.190 MTs of copper conductor bits from M/s. Vensar Constructions Company Ltd. for trading purposes, but in fact what they had cleared was copper wire mentioning its correct description in the invoices from the factory without payment of duty.

For the sale of finished goods, which was alleged to be different from purchased goods, a show-cause notice was issued to the Appellant demanding total duty of Rs.18,63,254/- being the clearances made from their factory without payment of duty from March 2012 to March 2013 along with interest and proposal for a penalty. 

On adjudication, the demand was confirmed with interest and an equivalent penalty.  On appeal, the Commissioner (Appeals) upheld the order of the adjudicating authority and rejected their appeal. 

It was submitted that no investigation was carried out on the statutory records of the appellant relevant to manufacture and clearance from the factory except verifying the balance sheet, sales, purchase invoices etc., in which it has been clearly reflected that during the relevant period, the appellant was also engaged in trading of copper wire apart from undertaking manufacturing activity. 

Further, he has submitted that all the trading invoices issued by the appellant clearly show that the inputs are cleared as such i.e., copper wire; hence it was the duty of the Department to investigate at the end of purchasers and transporters who transported their goods on the said claim of the appellant. The vendors were not examined. 

It was viewed that though there are some apparent discrepancies/contradictions in the description of the goods; also contradictions in the statements of the Transporter and Director vis-à-vis invoices, however, in my opinion, such contradictions cannot itself establish that the appellant had received the purchased goods in their factory, processed and converted into finished goods cleared without payment of duty. 

“No investigation was carried out after intimation letters were received in the Range office even though these were addressed from time to time, much before the audit objection, no verification was carried out.  Therefore, it is difficult to accept the allegation of the department that the quantity of goods as shown in the purchase invoices were brought into the factory, processed, converted into finished goods and removed clandestinely without payment of duty.”, held the Judicial Member Dr D M Misra.

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