2004 (2) TMI 445 - AT - Central Excise

Summary

Issues: Duty demand on clandestine production and removal, penalty imposition on the company and its director, justification of penalties, reduction of duty demand, interest liability

Duty Demand on Clandestine Production and Removal:
The case involved a manufacturer of plastic film sheets and plates facing a duty demand of approximately Rs. 12 lakhs due to alleged clandestine production and removal of goods without paying Central Excise duty. The duty demand arose from discrepancies observed during stock-taking, where the goods were described differently in various copies of invoices. The appellant's explanation that the goods removed were waste used for resale lacked supporting commercial evidence like purchase documents or payment records. The tribunal found the appellant's conduct duplicitous, violating Central Excise Rules, and rejected the explanation, confirming that goods were clandestinely manufactured and cleared without duty payment.

Penalty Imposition on the Company and Its Director:
A penalty of Rs. 35,000/- was imposed on the director of the manufacturing company for his involvement in the fraudulent activities. The tribunal considered the evasion of duty due to the appellant's duplicitous conduct as clear fraud, justifying the penalty. The penalty on the manufacturer was reduced to Rs. 5 lakhs considering the duty reduction and interest liability. The penalty on the director was upheld as he was directly involved in creating false records, indicating fraudulent activities.

Justification of Penalties:
The tribunal justified the penalties imposed based on the fraudulent conduct of the appellant, leading to duty evasion. The reduction in the duty amount did not eliminate the need for penalties, as the appellant's actions were deemed fraudulent. The penalties were considered appropriate given the seriousness of the violations and the involvement of the director in the fraudulent activities.

Reduction of Duty Demand:
After considering the shortage of inputs and finished products as indicative of clandestine production, the tribunal reduced the duty demand to Rs. 10,88,676/-, which was deemed payable by the appellants. The duty demand on missing inputs was linked to the clandestine production demand, leading to the final reduced amount. The tribunal emphasized that the net amount was due and required payment by the appellants.

Interest Liability:
In addition to the reduced duty demand, the appellant manufacturer was held liable to pay interest as applicable. The tribunal's decision included reducing the duty demand, adjusting penalties, and confirming the interest liability, ensuring that the appellant fulfilled its financial obligations as per the judgment.

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