2005 (11) TMI 333 - AT - Central Excise

Summary

Issues Involved:
1. Legitimacy of the loose production slips.
2. Discrepancies in production capacities and electricity consumption.
3. Allegations of planted evidence by employees.
4. Cross-examination and verification of suppliers and transporters.
5. Eligibility for Modvat credit.
6. Imposition of penalties on various individuals.

Detailed Analysis:

1. Legitimacy of the Loose Production Slips:
The main contention from the appellant was that the loose production slips recovered from the premises of both units were planted by employees Gurdev Ram and R.P. Singh due to dissatisfaction with the management. The appellant argued that these slips did not belong to the units and were intended to harm the management. The adjudicating authority, however, relied on these slips to confirm the demand and impose penalties.

2. Discrepancies in Production Capacities and Electricity Consumption:
The appellant contested the production capacity mentioned in the SCN, claiming that their furnaces could only produce 2.5 metric tons (m.t.) of ingots per heat, contrary to the 3 m.t. per heat stated in the slips. They also highlighted the electricity consumption norms fixed by the Commissioner of Central Excise, which indicated that producing 1 m.t. of ingots required 1100 units of electricity. The appellant argued that the production slips showed consumption of only 200-250 units per m.t., which was not feasible. Additionally, they provided a certificate from the Electricity Board confirming no theft of electricity and log sheets showing power cuts during the alleged production periods.

3. Allegations of Planted Evidence by Employees:
The appellant claimed that employees Gurdev Ram and R.P. Singh planted the production slips to damage the management. They pointed out that the Excise Clerks initially admitted the entries under coercion and later retracted their statements. The appellant also noted that the production slips indicated receipt of scrap from suppliers like M/s. Vaibhav Associates and A.S. Traders, but no thorough investigation was conducted with these suppliers.

4. Cross-examination and Verification of Suppliers and Transporters:
The appellant argued that the adjudicating authority disallowed cross-examination of certain suppliers and transporters named in the private records. They contended that some suppliers retracted their statements during cross-examination or denied supplying scrap through affidavits. The appellant also highlighted that a diary recovered from commission agent Nasir Khan, which allegedly showed receipt of raw materials, was discredited as Nasir Khan retracted his statement.

5. Eligibility for Modvat Credit:
The appellant pleaded that Alfa Springs was eligible to take Modvat credit for the duty paid by the manufacturing unit, arguing that this negated the allegation of clearing goods without payment of duty. They relied on the Tribunal's decision in the case of Smithkline Beecham Consumer Healthcare Ltd. v. CCE, Chandigarh to support their argument.

6. Imposition of Penalties on Various Individuals:
The Revenue appealed against the dropping of penalty proceedings against certain employees, arguing that these individuals were directly involved in the evasion of Central Excise Duty and should be penalized. The Revenue also contended that the retraction of statements by Excise Clerks after two months was an afterthought and that the production slips and reports recovered contained detailed entries of raw materials and production, which were not immediately retracted.

Conclusion:
The Tribunal found that the case of the Revenue was primarily based on the daily production reports recovered from Alfa Casting Pvt. Ltd. and Alfa Spring Ltd., which contained detailed entries of production and raw material receipts. However, the Tribunal noted that the adjudicating authority did not consider the log sheets from the Electricity Board, which contradicted the production reports. The Tribunal remanded the matter to the adjudicating authority to verify the log sheets from the Electricity Board, allow cross-examination of witnesses, and reconsider the demand and penalties. Both sides were given the liberty to produce evidence in support of their claims. The impugned order was set aside, and the matter was remanded for fresh adjudication.