CESTAT Quashes Excise Duty Demand on Clandestine Production and Removal of Copper Tubes on ground of Absence of Corroborative Evidence

The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the central excise duty demand imposed on the clandestine production and removal of copper tubes on the ground of the absence of corroborative evidence. 

Shree Shyam Pipes Pvt. Ltd, the appellant assessee was a manufacturer of copper tubes and installation kits falling in Chapters 74 and 84 of the First Schedule to Central Excise Tariff Act, 1985, and appealed against the order passed by the Commissioner (Appeals) for confirming the demand of excise duty for clandestine production and removal of goods. 

Shri D. K. Tyagi, the counsel for the assessee contended that the quantum of excess and shortages determined by the exercise of stocktaking was negligible in all cases except for the scrap and the stock-taking errors and the weighing scale errors etc. could have accounted for the shortages and excesses. 

Also submitted that the goods which were still in the factory premises of the assessee had not been cleared and there cannot be any charge of clandestine clearance made against the assessee in respect of these goods and the officers could have asked the assessee to rectify their book balance and got them tallied with the physical stock determined by them. 

Sandeep Pandey, the counsel for the department relied on the decisions made by the lower authorities and contended that on physical verification of stock and examination of the records, finished goods involving duty were found excess whereas the stock of finished goods valued at Rs.42,105/- involving duty of Rs.5,263/- were found short. 

The Bench observed that in the case of CCE v. Sai Iron (India) Ltd, the court held that even if the assessee fails to explain the shortages themselves, the charge of clandestine removal cannot be imputed in the absence of an independent investigation to corroborate the allegation. 

Here the department raised the demand for excise duty without any corroborating evidence against the assessee and that the huge quantity of sponge iron would require a large fleet of lorries/trucks for their transportation and in the end in the absence of any such evidence on record, the findings of clandestine removal cannot be upheld. 

A single-member bench comprising Sanjiv Srivastava (Judicial) quashed the excise duty demand while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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