2003 (11) TMI 489 - AT - Central Excise

Clandestine removal - Proof - Fabric processing - Appeal by department - Grounds - Accountal of goods - Processed fabric - Non-entry in books

Issues Involved:
1. Confirmation of demand of Central Excise duty and penalty against M/s. Ajanta Synthetics and their Director.
2. Revenue's appeal against dropping of some demand of duty and penalty.
3. Reliability of Grey Receipt/Challans and Dyeing Receipt Books (DRBs).
4. Confirmation of demand based on private records.
5. Confiscation of seized goods and related penalties.

Issue-wise Detailed Analysis:

1. Confirmation of demand of Central Excise duty and penalty against M/s. Ajanta Synthetics and their Director:
The Collector confirmed the demand of duty amounting to Rs. 37,32,052/- and imposed penalties of Rs. 5 lakhs on the company and Rs. 1 lakh on the Director. The confirmation was based on the intelligence that M/s. Ajanta Synthetics were evading duty on processed man-made fabrics through suppression of production, misdeclaration, and clandestine removal of excisable goods. The Central Excise Officers seized unaccounted stock valued at Rs. 2,17,908/- and packed fabrics valued at Rs. 1,41,173/- from their premises and a godown, respectively.

2. Revenue's appeal against dropping of some demand of duty and penalty:
The Revenue appealed against the dropping of certain demands of duty and penalties, arguing that the Collector should not have set aside the demands in Annexures D-I, D-II, D-III, D-IV, and D-VIII. The Collector had confirmed part of the demand in Annexures D-I and D-II based on the corroboration between Grey Challans and other production records, but dropped the remaining demands due to unreliability of the documents.

3. Reliability of Grey Receipt/Challans and Dyeing Receipt Books (DRBs):
The Collector found the Grey Receipt/Challans and DRBs unreliable, as they were maintained casually and did not correlate with the authenticated Lot Registers. However, the Revenue contended that these documents should be considered reliable as they were corroborated by statements from employees and the Director, who admitted to mis-declaring the quality of fabrics. The Tribunal agreed with the Revenue, stating that the processing could not have been undertaken without knowing the quality/composition of the fabrics, thus confirming the demand based on these documents.

4. Confirmation of demand based on private records:
The demand in Annexures D-VI and D-VII was confirmed based on private records, specifically a Note Book (Serial No. 81) maintained by an employee, which was found in the drawer of the Factory-in-charge. The Note Book contained details of unaccounted processed fabrics. The Tribunal upheld the Collector's findings, noting that the Note Book was maintained as per instructions from the management and contained accurate records of extra packed fabrics not accounted for in statutory records.

5. Confiscation of seized goods and related penalties:
The Tribunal upheld the confiscation of seized goods, both from the factory premises and the godown, as the processed fabrics were not entered in statutory records, and the explanation provided by the assessee was not accepted. The redemption fine of Rs. 50,000/- was deemed reasonable, and the penalties imposed by the Collector were upheld.

Conclusion:
The Tribunal allowed the Revenue's appeal in respect of Annexures D-I and D-II, confirming the demand of duty based on Grey Challans and DRBs. The appeals by M/s. Ajanta Synthetics were dismissed, and the confiscation of seized goods and related penalties were upheld. The Tribunal found no reason to interfere with the Collector's findings and confirmed the demands and penalties as reasonable and justified.

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