2026-VIL-901-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Establishment of Shortage of Raw Materials and Finished Goods - Stock Verification Based on Eye Estimation - During investigation, physical stock taking is not undertaken by authorities and stocks are recorded on the basis of mere eye estimations without any physical weighment - Whether shortage of raw materials or finished goods can be established on the basis of eye estimation alone in the absence of proper physical weighment and weighment slips – HELD - It is a settled principle of law that shortage of raw materials or finished goods cannot be established on the basis of eye estimation alone. The demand raised on account of shortage of raw materials and finished goods found during the investigations is not sustainable in law as the stock verification does not meet the requirement of proper physical verification. The mere signature of the employees on the stock verification report is not sufficient proof of shortage when no actual weighment has been conducted and no weighment slips are available on record - The demands raised on account of shortage of raw materials and finished goods are set aside and the appeal is allowed - Denial of SSI Exemption - Manufacture of Branded Goods - Appellants are denied the benefit of SSI Exemption on the ground that they were manufacturing branded goods with the brand name Essel embossed on the products. The brand name Essel is owned by a different company for different products - Whether the benefit of SSI Exemption available under Notification No. 09/2001-CE dated 01.03.2001 and Notification No. 09/2003-CE dated 01.03.2003 can be denied to manufacturers solely on the ground that they have used brand name markings on their products when no evidence shows that the appellants actually used the brand name – HELD - No corroborative evidence has been brought on record by the Revenue in support of their allegations that the appellants have used the brand name of others. The brand name Essel is owned by a different entity for different goods and not for the goods manufactured by the appellants - Mere markings or embossing of brand names do not constitute use of another's brand in a manner that would disentitle the appellants from the benefit of Small Scale Exemption. The condition in the notification regarding use of brand name does not apply to the facts of the case - The demands raised on account of manufacture of branded goods and denial of Small Scale Exemption are set aside - Allegation of Clandestine Removal of Goods - Absence of Corroborative Evidence - Whether a charge of clandestine removal of goods can be sustained when no buyer of finished goods or supplier of raw materials is brought out by investigation and it is not established how much raw materials were used for manufacture of the allegedly clandestinely removed goods – HELD - The allegation of clandestine removal of goods is not supported by the investigation. No buyer of finished goods or supplier of raw materials has been identified during investigation, nor have transporters been investigated. Critically, the revenue has failed to establish how much raw materials were actually used by the appellants for manufacture of the goods allegedly removed clandestinely. The difference in rough records and statutory records alone, without corroborative evidence, cannot sustain the charge of clandestine removal - The demand raised on the ground of clandestine removal of goods is set aside - Maintenance of Parallel Invoices - Absence of Verification - The appellants are alleged to have maintained parallel invoices with the same serial numbers but showing different values to effect duty evasion - Whether a demand based on the allegation of parallel invoices can be sustained when these invoices have not been verified to establish against whom they were actually issued or whether the recipients received them – HELD - The parallel invoices have not been verified to establish against whom they were actually issued or whether those persons have received the invoices. In the absence of any evidence on record verifying the actual issuance and receipt of parallel invoices, the demand raised based on this allegation cannot be sustained. The mere existence of invoices with similar serial numbers showing different values is insufficient to establish duty evasion without verification of actual issuance and receipt -The demand raised on account of parallel invoices is set aside - Disallowance of CENVAT Credit - Demand is raised for disallowance of CENVAT Credit on the allegation that inputs were availed without actual receipt of goods - Whether CENVAT Credit can be disallowed when the appellant has availed credit on the basis of computerised statements upon receiving the goods and the revenue has not established that the goods were not actually received by the appellant for manufacture – HELD - The appellant has availed CENVAT Credit on the basis of computerised statements on receiving the goods. The Revenue has not made out a case that the said goods were not received by the appellant for manufacture of their final goods. The discrepancy between computerised records at head office and seized private records alone cannot establish that goods were not received. Since the revenue has failed to prove non-receipt of inputs, the denial of CENVAT Credit is without any basis and is not sustainable in law - The CENVAT Credit cannot be denied and the demand for disallowance is set aside - Disallowance of CENVAT Credit on Shortage of Raw Materials - Whether CENVAT Credit can be disallowed on account of shortage of raw materials when the shortage itself has not been clearly established by the revenue – HELD - Since the shortage of raw materials has not been clearly established by the revenue through proper physical verification and weighment, the denial of CENVAT Credit based on such unestablished shortage is not sustainable. The foundation for denying CENVAT Credit fails when the underlying fact of shortage is itself not proven through acceptable methods - The demands for disallowance of CENVAT Credit on account of shortage of raw materials are set aside - Imposition of Penalty Under Central Excise Rules - Condition Precedent Not Satisfied - Whether penalty can be imposed on individual proprietors and Directors under Rule 26 of Central Excise Rules 2002 when the underlying allegations against the companies on which the penalty is based are not sustainable - HELD - When the allegations against the companies are not maintainable and the underlying charges of duty evasion are set aside, the condition precedent for imposing penalty under Rule 26 on the individuals cannot be satisfied. The findings in respect of imposition of penalty on the individuals are based on vague allegations and baseless findings in respect of allegations against the companies. When the primary charges fail, the derivative liability for penalty cannot stand - No penalty is imposable on the individual proprietors and Directors as the condition precedent for penalty imposition is not satisfied.
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