2002 (2) TMI 465 - AT - Central Excise

Summary

Issues Involved:
1. Validity of duty demand and penalties imposed.
2. Reliance on transport registers as evidence.
3. Proof of clandestine manufacture and removal.
4. Application of Section 11AC for penalty.

Summary:

1. Validity of duty demand and penalties imposed:
The appellants contested the impugned order-in-original dated 16-4-2001 by the Commissioner of Central Excise, Jaipur-II, which affirmed the duty demand of Rs. 56,86,561/- along with equal penalty and an additional penalty of Rs. 10,00,000/- u/s 11AC and u/r 173-Q. The Commissioner's decision was based on the alleged suppression of production and removal of processed fabrics without payment of duty.

2. Reliance on transport registers as evidence:
The Department's main reliance was on the entries in the transport registers of M/s. Gupta Transport Corporation. However, the Tribunal found that these entries could not be accepted as conclusive proof of clandestine receipt and removal of grey fabrics by the appellants. The Tribunal noted that the names of other firms such as M/s. M.B. Processing, M/s. Sadhna Fabrics, and M/s. Heritage Indus. were also recorded as recipients of the goods, and no evidence was provided to prove that these firms were not in actual existence or that their names were fraudulently used by the appellants.

3. Proof of clandestine manufacture and removal:
The Tribunal emphasized that no tangible evidence was presented to prove the clandestine manufacture and removal of processed fabrics by the appellants. No statements from consignors or buyers were recorded, and no processed fabrics were intercepted in transit. The Tribunal referred to previous cases, including M/s. Rhino Rubbers Pvt. Ltd. v. CCE, where it was held that third-party records alone could not form the basis for duty liability without direct evidence linking the assessee to the alleged transactions.

4. Application of Section 11AC for penalty:
The Tribunal noted that the provisions of Section 11AC, which came into force on 28-9-1996, could not be applied retrospectively to impose penalties for the period prior to its enactment. Since the duty demand pertained to the years 1994-95 to 1997-98, the penalty u/s 11AC was not applicable for the period before 28-9-1996.

Conclusion:
The Tribunal set aside the impugned order of the Commissioner, finding that the duty demand and penalties were based on assumptions and presumptions without tangible evidence. Both appeals were allowed with consequential relief, if any, permissible under the law.