Order date – 13 September 2022

Facts – 

• The Appellant, Shri Shankar Lal Dhingra Partner, M/s. M G Food Products and Ors., were searched by the revenue in response to a intelligence received by the revenue that they are indulged in evasion of Central Excise duty by way of suppression of actual production and by purchasing raw material in cash without cover of documents such as invoices/ challans. It was also revealed that the goods produced in their factory are being removed clandestinely to the dealers and distributors appointed by them in various cities, towns of the country.
• It was observed that they were not maintaining any entry of raw material at their factory gate or godown. The stock verification revealed that the stock was unaccounted and the difference was not being explained at the time of search. On the reasonable belief, they were also alleged to have produced and cleared the sugar confectionery clandestinely and unaccounted goods were held liable for confiscation.
• From the scrutiny of the documents recovered, Department formed the opinion that M/s. M G Food Products has sold their goods to M/s. Amber Sales Corp and anr. without cover of invoices and without payment of duty.
• Pursuant to these observations that the duty demand of such amount with fine and penalty as was proposed to be recovered from appellants. The same was upheld by the department.
• Aggrieved, the appellant filed an appeal.

Issue – 

• Whether the appellant is liable to pay demand of duty with fine and penalties?

Order – 

• The Tribunal observed that in the present case, there is no inculpatory statement by any of the representative of the manufacturers; the department had not conducted any investigation to prove clandestine manufacture.
• Relying on Commr. Of Cus. C.E. & S.T. Ghaziabad vs. Auto Gollon Industries P Ltd in which it was held reliance of department only on rough work progress documents and no evidence of raw materials purchase, inculpatory statement by representative, no inquiry with the buyers of finished goods, transportation and consideration for goods clandestinely removed final products, the shortage of one of raw materials and theoretical basis of input output ratio do not lead to conclusion of clandestine manufacture and removal thereof.
• In the present case, also the Tribunal did not found any evidence which establishes beyond doubt or which is a positive evidence to establish beyond doubt the allegation of clandestine removal of the finished goods by the appellants manufactures.
• Also, it was held that imposition of penalty upon the non registered dealers herein that too under Rule 25 and Rule 26 of Central Excise Rules is absolutely unreasonable, infact is beyond the statutory provisions.
• Appeal allowed.