Assessee successfully proved Department's Shallow investigation and saved itself from clandestine removal SCN.

Case Name:

Excise Appeal No. 55105 Of 2013 - M/s Ludhiana Steel Rolling Mills vs. Commissioner of Central Excise, Ludhiana

Key Takeaways:

1. Lack of Proof:

The department failed to provide evidence to show that the scrap was not purchased by the appellant or that it was generated in the factory.

2. No thorough investigation:

The tribunal emphasized the necessity of conducting a thorough investigation to prove allegations of clandestine removal.

3. Show-Cause Notice set aside:

The CESTAT sat aside the show-cause notice, and the impugned order because of the absence of investigation and tangible evidence.

Case Synopsis:

An excise appeal case between M/s Ludhiana Steel Rolling Mills and the Commissioner of Central Excise, Ludhiana. The Customs, Excise & Service Tax Appellate Tribunal, Chandigarh, Regional Bench – Court No. 1, heard the case.

Here’s a summary of the case:

M/s Ludhiana Steel Rolling Mills, engaged in the manufacture of bars, rounds, and rods, was found to be trading in steel scrap during an audit.

The department issued a show cause notice to the appellant, alleging a violation of Section 6 of the Central Excise Act 1944 read with Rule 9 (1) and (2) of Central Excise Rules, 2002, demanding Central Excise duty of Rs. 82,20,602/- along with interest and penalty.

The Revenue alleged that the appellants had removed scrap from their manufacturing premises without paying the applicable Central Excise duty and had not modified their registration to include the activity of trading the excisable goods.

The appellant claimed that the trading of the scrap was conducted from their head office, which was located at a distance from the manufacturing premises, and therefore, the same was not entered in the Central Excise Records maintained at the factory.

After hearing both sides and perusing the records of the case, the tribunal found that

• the department had not provided proof to show that the scrap was not purchased by the appellant or that it was generated in the factory.
• the department conducted no investigation to prove the production of the scrap - for example no stock taking.

The tribunal referred to a case from the Hon’ble Allahabad High Court (̌Continental Cement Company 2014 (309) ELT 411 (All.), which emphasized the need for tangible evidence to prove allegations of clandestine removal.

Ultimately, the tribunal set aside the impugned order and allowed the appeal, stating that the show-cause notice and the impugned order were liable to be set aside due to the lack of investigation and proof.

In conclusion, the tribunal ruled in favor of M/s Ludhiana Steel Rolling Mills, setting aside the impugned order and allowing the appeal.

FAQ:

Q1: What was the case about?

A1: The case involved an excise appeal filed by M/s Ludhiana Steel Rolling Mills against the Commissioner of Central Excise, Ludhiana, regarding the trading of steel scrap and the alleged violation of the Central Excise Act.

Q2: What was the ruling of the tribunal?

A2: The tribunal ruled in favor of M/s Ludhiana Steel Rolling Mills, setting aside the impugned order and allowing the appeal due to the lack of investigation and proof provided by the department.