2006 (2) TMI 390 - AT - Central Excise

Demand - Limitation - Larger period - Invocation of - Penalty - Mandatory penalty equal to duty - Demand and interest

Issues Involved:
1. Admissibility of fresh proceedings based on the same investigation.
2. Allegations of clandestine removal and undervaluation.
3. Applicability of extended period for issuing the Show Cause Notice.
4. Evidence supporting undervaluation and clandestine removal.
5. Re-computation of duty liability and penalties.

Detailed Analysis:

1. Admissibility of Fresh Proceedings Based on the Same Investigation:
The appellants argued that fresh proceedings based on the same investigation were not admissible, citing various case laws. They contended that the initial proceedings had already been completed by the Additional Commissioner, covering the period from 19-6-2001 to 30-1-2002. The Tribunal noted that the initial proceedings dealt with the confiscability of seized goods and duty demand, but did not address undervaluation. Therefore, the subsequent proceedings by the Commissioner were found to be justified as they dealt with different aspects, specifically undervaluation.

2. Allegations of Clandestine Removal and Undervaluation:
The Tribunal examined the evidence of clandestine removal and undervaluation. The Commissioner had confirmed a demand of Rs. 26,63,508/- for the period from 1-6-2001 to 30-1-2002 and Rs. 28,23,031/- for the period from 1-2-2002 to 31-3-2003, based on undervaluation. The Managing Director's statements, corroborated by documents and statements from dealers, supported the allegations. The Tribunal upheld the findings of undervaluation and clandestine removal, noting that the statements recorded under Section 14 of the Central Excise Act could not be ignored.

3. Applicability of Extended Period for Issuing the Show Cause Notice:
The appellants argued that the Show Cause Notice was time-barred, as it should have been issued within six months from the date of seizure. The Tribunal found that the initial Show Cause Notice covered the seized goods and was issued within the stipulated period. The subsequent notice addressed undervaluation and was issued based on further investigations. Therefore, the extended period was applicable, and the notice was not time-barred.

4. Evidence Supporting Undervaluation and Clandestine Removal:
The Tribunal reviewed the evidence, including the yellow slips and statements from the Managing Director and dealers. The Managing Director admitted to undervaluation and the modus operandi adopted. The Tribunal found that the evidence, including corroborative statements, was sufficient to support the allegations. The Tribunal dismissed the appellants' argument that the Commissioner's findings on transaction value and Chartered Accountant's certificate should lead to dropping the proceedings, clarifying that these findings pertained to the recorded transactions and did not account for the undervaluation.

5. Re-computation of Duty Liability and Penalties:
The Tribunal noted that while the appellants had not contested the demand for the period from 1-6-2001 to 30-1-2002, they had requested Modvat benefit on inputs used in the manufacture of final products. The Tribunal found the imposition of penalty equal to the duty evaded to be harsh and directed re-computation of duty liability, including Modvat benefits and other admissible deductions. The matter was remanded to the original authority for re-computation of duty liability and penalties, with the interest under Section 11AB upheld.

Conclusion:
The Tribunal upheld the findings of clandestine removal and undervaluation, justified the extended period for issuing the Show Cause Notice, and directed re-computation of duty liability and penalties, remanding the matter to the original authority for further action.

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