2001 (10) TMI 870 - AT - Central Excise

Issues Involved:
1. Demand of Central Excise Duty
2. Eligibility for SSI Benefits
3. Imposition of Penalties
4. Confiscation of Goods
5. Violation of Principles of Natural Justice

Detailed Analysis:

1. Demand of Central Excise Duty:
The Commissioner of Central Excise, Hyderabad confirmed a demand of Rs. 2,11,12,227 from BEC for duty payable on finished goods (button bits, hammers, parts of hammer assemblies, and M.S. scrap) cleared without payment of duty during October 1995 to June 1997, in contravention of Rule 9(1) of the Central Excise Rules, 1944. Additionally, a differential duty of Rs. 7,72,693 for clearances made during July 1997 to November 1997 and Rs. 31,38,596 for the period April 1998 to February 2000 was demanded, as BEC was not eligible for SSI benefits for the years 1997-98, 1998-99, and 1999-2000.

2. Eligibility for SSI Benefits:
The Commissioner concluded that BEC had crossed the Rs. 3 crore turnover threshold in the preceding financial years due to unaccounted clearances, making them ineligible for SSI benefits for the subsequent years. This was based on evidence from private records and corroborated by statements from various individuals, revealing the extent of clearances and procurement of raw materials.

3. Imposition of Penalties:
A mandatory penalty of Rs. 1,12,95,833 was imposed under Section 11AC of the Central Excise Act, 1944. Additional penalties included Rs. 1,50,00,000 on BEC under Rule 173Q, Rs. 40,00,000 on the Managing Partner, Rs. 1,00,000 on a clerk, and Rs. 10,00,000 on a manager under Rule 209A of the Central Excise Rules, 1944. The penalties were justified on the grounds of deliberate evasion of duty and the clandestine removal of goods.

4. Confiscation of Goods:
The Commissioner ordered the confiscation of various parts of drilling rigs, button bits, and hammer assemblies found at different premises, which were seized during raids. The goods were confiscated under Rule 173Q of the Central Excise Rules, 1944, with options for redemption on payment of fines.

5. Violation of Principles of Natural Justice:
The appellants argued that there was a violation of natural justice due to the denial of the opportunity to cross-examine key witnesses, namely G. Ram Murthy and E.V. Subba Reddy, whose statements and private records were crucial to the case. The Tribunal noted that the Commissioner had failed to compel the witnesses to appear for cross-examination, which was essential for a fair adjudication. The Tribunal emphasized the need for corroborative evidence, such as electricity consumption and production capacity, to substantiate the charges of clandestine removal.

Conclusion:
The Tribunal found that the principles of natural justice were violated and that the Commissioner had not adequately considered the rebuttal evidence provided by the appellants, such as reports from the Andhra Pradesh Productivity Council and a Chartered Engineer. The Tribunal allowed the appeals by way of remand for de novo consideration, directing the Commissioner to ensure the witnesses' presence for cross-examination and to re-evaluate the evidence in light of the appellants' arguments and relevant legal precedents.

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