2006 (8) TMI 79 - AT - Central Excise

Demand Alleged that appellant is the clandestine removal of good The allegation is based on the lose chits recovered during investigation After considering all the facts impugned order is set aside and allow the appeals by the respective authority

Issues Involved:
1. Alleged suppression of receipt of raw materials and production.
2. Admissibility and reliability of evidence (hand-written chits).
3. Power consumption discrepancies.
4. Alleged bias and violation of natural justice.
5. Time-barred demand under Section 11A(1).

Issue-wise Detailed Analysis:

1. Alleged Suppression of Receipt of Raw Materials and Production:
The case revolves around the alleged suppression of receipt of raw materials and production of Potassium Chlorate by M/s. Ruby Chlorates Pvt. Ltd. The department's case is based on hand-written chits recovered during a search, which indicated discrepancies in the receipt and utilization of Potassium Chloride (RC). The adjudicating authority concluded that the assessee had suppressed the production of 166.300 MTs of Potassium Chlorate, based on the input-output ratio provided by the Managing Director.

2. Admissibility and Reliability of Evidence (Hand-written Chits):
The primary evidence relied upon by the department were hand-written chits (Chit No. 1 and Chit No. 7). Chit No. 1 detailed the receipt and stock of RC, while Chit No. 7 showed additional receipt of RC. However, the authorship and accuracy of these chits were disputed. The chemist who wrote Chit No. 1 stated that the figures were rough and only the Manager was aware of the details. Chit No. 7, initially attributed to Shri Satyanarayana, was later claimed to be written by a security guard, Rajendran. The Tribunal found these chits unreliable as evidence of clandestine production and clearance.

3. Power Consumption Discrepancies:
The department's findings on clandestine production were also based on power consumption figures. The Commissioner calculated that the power consumption per ton of Potassium Chlorate was significantly lower than the figures recorded in RG1 for December 1992. However, the Tribunal noted that the discrepancies in power consumption figures and the claim of excess power consumption due to faulty meters (supported by TNEB communication) rendered the findings questionable.

4. Alleged Bias and Violation of Natural Justice:
The appellants argued that the adjudicating authority was biased, citing an altercation between the Commissioner and the Managing Director. They also claimed that the order was passed in violation of natural justice, as cross-examination of certain individuals was not allowed. The Tribunal acknowledged these concerns and found that the adjudicating process lacked fairness.

5. Time-barred Demand under Section 11A(1):
The Tribunal observed that the demand was time-barred. The show cause notice was issued on 3-1-94 for the period 6-7-92 to 10-2-93, beyond the six-month period stipulated under Section 11A(1) of the Act. The Tribunal referenced the Madras High Court's observation in Norton Intec Rubbers Pvt. Ltd. v. CCE, which stated that a demand is time-barred if the unit was under physical control of the excise department during the relevant period.

Conclusion:
The Tribunal concluded that the department failed to provide positive and cogent evidence of clandestine production and clearance. The reliance on hand-written chits of uncertain authorship, discrepancies in power consumption figures, and lack of corroborative evidence rendered the findings unsustainable. The impugned order was set aside, and the appeals were allowed. The Tribunal emphasized that demand of duty cannot be based on assumptions and presumptions, and must be supported by concrete evidence.

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