The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the serious charge of clandestine removal cannot be levelled on basis of mathematical calculation.
The appellant is engaged in the manufacture of plywood and board etc.; officers of DGCEI conducted an investigation against M/s Dechem Plastic Pvt. Ltd, M/s Ashoka Drugs and M/s Shiva Chem and have recorded statement of one Shri Ashok Aggarwal; Shri Ashok Aggarwal has admitted to have supplied formaldehyde to various manufacturers of plywood as mentioned in the weighment slips recovered from them.
Revenue calculated the amount of plywood that could have been manufactured by the appellants using the quantity of formaldehyde alleged to have purchased from Shri Ashok Aggarwal; on the allegation that the appellants have manufactured and cleared 9382.41 sqm of plywood and 9906.57 sqm of block board evading Central Excise duty of Rs.2,09,04,500/-, the impugned show-cause notice was issued and demand was confirmed by the impugned order along with interest and penalty. Hence, the appeal.
The Counsel for the appellants, submitted that though Shri Ashok Aggarwal provided proof of supply of formaldehyde to 26 manufacturers, show-cause notices were issued to only 07 manufacturers; out of these 07 show-cause notices, 02 show cause notices, issued to M/s Mahalakshmi Industries and M/s LRB Industries, were dropped by the Joint Commissioner and the same was accepted by the Department. On appeals filed by the various appellants, This Tribunal has dropped the proceedings against M/s Volcano Plywood Industries, M/s Sant Gianashwar Kwatra.
The Counsel further submitted that the Department did not conduct any investigation regarding the actual transport of the formaldehyde claimed to have been supplied by Shri Ashok Aggarwal; the drivers or the transporters were not questioned; no investigation of procurement of other raw materials like wood, veneer, phenol, melamine etc. was conducted.
A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “While we accept the proposition, we are of the considered opinion that a serious charge like clandestine removal cannot be leveled on the basis of a mathematical calculation i.e just by calculating a quantum of plywood that could have been manufactured using the alleged receipt of formaldehyde. Therefore, we find no reason, whatsoever, to take a different view than the one taken by us in the cases cited above. In view of the same, we find that the Department has not made out any case of clandestine removal against the appellants and therefore, the impugned order is not sustainable and is liable to be set aside.”
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