2025-VIL-695-CESTAT-ALH-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Excise duty, SSI exemption, Clandestine removal, CENVAT credit - The appellant was a partnership firm engaged in the manufacture of pesticides and organic manure. The revenue authorities alleged that the appellant had clandestinely cleared pesticides and organic manure beyond the SSI exemption limit and therefore, demanded excise duty of Rs.1,10,96,149/- along with recovery of CENVAT credit of Rs.76,45,618/- and imposition of interest and penalties - Whether the charge of clandestine removal of goods to the extent stated in the show cause notice can be sustained on the basis of the material on record - HELD - The charge of clandestine removal cannot be sustained as it is not based on sufficient and tangible evidence - The revenue authorities relied solely on the statements of the partners and the sales details obtained during the course of recording the statements, without any other corroborative material on record - The Tribunal referred to the consistent view taken by various High Courts that clandestine removal is a serious charge which needs to be proved by the revenue through clinching and tangible evidence such as excess purchase of raw materials, excess power consumption, transportation details, realisation of sale proceeds etc. In the absence of such evidence, the charge of clandestine removal fails and consequently, the denial of SSI exemption on this ground also cannot be sustained - the demand of excise duty on the ground of clandestine removal and denial of SSI exemption is set aside - the appeal is allowed - Whether the CENVAT credit of Rs.76,45,618/- demanded under Rule 14 of the CENVAT Credit Rules, 2004 is sustainable - HELD - The demand of CENVAT credit is not sustainable - The appellant had initially informed its intention to avail the credit, but subsequently reversed the credit in its books before any utilization, upon receipt of the show cause notice - The Tribunal relied on the settled position that if the credit is availed in the books but not utilized, it cannot be said that any credit was wrongly taken, and therefore, the demand under Rule 14(1)(i) of the CENVAT Credit Rules, 2004 is not sustainable - As the credit was availed in the books under the bona fide impression that it would be admissible if the duty demand is confirmed, the reversal of the same before utilization cannot lead to its recovery - the demand of recovery of CENVAT credit is set aside.
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