2002 (4) TMI 753 - AT - Central Excise

Summary

Issues Involved:
1. Demand of duty and imposition of penalty for alleged clandestine removal of excisable goods.
2. Disallowance of Modvat credit and imposition of penalties for allegedly fraudulent credit on inputs not received.
3. Imposition of penalties on company officials under Rule 209A of the Central Excise Rules.

Issue 1: Demand of Duty and Imposition of Penalty
The Appellant Company was accused of removing excisable goods twice on the same invoice numbers by maintaining two sets of invoices or without any invoice. The initial adjudication confirmed the duty and imposed penalties without providing necessary documents or enquiry reports, leading to an ex parte order. The Tribunal remanded the matter for non-compliance with principles of natural justice, directing the supply of documents and personal hearings. The Commissioner reaffirmed the demand and penalties, citing no plausible defense from the Appellants. The Appellants argued inadequate hearing opportunities, non-receipt of hearing notices, and disallowed cross-examinations, relying on decisions like Balbir Steel (P) Ltd. v. CCE and Shalimar Agencies v. Commissioner of Customs. They contended that the findings were based on the set-aside adjudication order, showing non-application of mind and making the impugned order liable to be set aside.

Issue 2: Disallowance of Modvat Credit and Imposition of Penalties
The Adjudicating Authority disallowed Modvat credit of Rs. 30,96,349/- for inputs allegedly not received or used in manufacturing, based on statements from company officials and the Deputy Chief Controller of Explosives. The Appellants contested the findings, citing procedural lapses like disallowed cross-examinations and non-correlation of manufacture with power consumption. They argued that penalties under Rule 57-I(5) and Rule 173Q for the same offense were unjustified. The Tribunal upheld the disallowance of Modvat credit and recovery from the Appellant Company but reduced the penalty to Rs. 15 lakhs, setting aside the penalty under Rule 173Q.

Issue 3: Imposition of Penalties on Company Officials
The Appellants argued that company officials should not be penalized under Rule 209A, as they are not manufacturers and cannot act independently. The Tribunal found no merit in this argument, emphasizing that the scheme under the Central Excise Rules imposes penalties on any person dealing with excisable goods liable for confiscation. However, the Tribunal reduced the penalties on officials, acknowledging the higher side of the initial penalties.

Final Judgments:
1. Appeal against Order No. 37/2000:
- Disallowance of Modvat credit of Rs. 30,96,349/- and its recovery is upheld.
- Penalty under Rule 57-I(4) on the Appellant Company reduced to Rs. 15 lakhs.
- Penalties on officials reduced to Rs. 5 lakhs for Rajesh Jain, Rs. 50,000/- for B.D. Agarwal, and Rs. 50,000/- for A.K. Jain.
- Penalty of Rs. 10 lakhs on the Appellant Company under Rule 173Q is set aside.

2. Appeal against Order No. 36/2000:
- The order is deemed non-speaking and is remanded for fresh adjudication with directions to provide a well-reasoned and speaking order.