2005 (4) TMI 523 - AT - Central Excise

Demand of duty - Clandestine removal of the goods - manufacture of fireworks - Penalty on partners - HELD THAT - We find that the conduct of the appellants has been fraudulent in as much as in respect of shortages in the finished stock and the duty paid godown the matter has not been contested. There is a clear cut case of removal without payment of duty detected by the officers when a full truck load of fireworks were intercepted without any duty paying documents and the appellants have failed to produce any duty paying documents relating to them till today. We, therefore, hold that the findings given by the Commissioner are fully supported by the statement of the partner and their fraudulent conduct. The packing slips were duly signed by the partner and contain all details including vehicle number and therefore they were more in the nature of delivery slip rather than the packing slips. Similarly lorry receipt bear signature in most cases of the consignee in token of having receive the goods and also admitted by the partner in his statement. The demand of duty and confiscation of goods is therefore upheld and so is the redemption fine imposed. As regards the mandatory penalty u/s 11AC, we hold that the penalty is the maximum penalty provided and not equivalent penalty and we are inclined to reduce this penalty to Rs. 5 Lakhs only. As regards the second appeal regarding penalty on the partner since the partner was actively involved in the removal of the goods, we find no justification to interfere with the penalty imposed on him which in our view is reasonable. Both the appeals are disposed of in above terms.

Summary

Issues:
1. Seizure of firework goods without proper Central Excise duty documents.
2. Detection of shortages in finished goods stock during physical stock-taking.
3. Discovery of lorry delivery slips without duty paying documents.
4. Show cause notice for duty demand, confiscation of goods, and imposition of penalties.
5. Dispute over duty demand based on recovered packing slips.
6. Contention regarding clandestine removal of goods and lack of evidence.
7. Dispute over shortages in finished goods stock and duty paid godown.
8. Allegation of clandestine clearance based on lorry delivery slips.
9. Lack of evidence on raw material availability for alleged clandestine clearance.
10. Penalty imposition under Section 11AC and contesting its mandatory nature.

Analysis:
1. The appellants were involved in manufacturing fireworks, with the department seizing goods worth Rs. 3,51,114 due to lack of proper duty documents. Incriminating documents were found during searches, indicating clandestine removal of goods worth Rs. 1,14,61,197.
2. Shortages in finished goods and duty paid godown were noticed during stock-taking, leading to duty demands of Rs. 10,017 and Rs. 43,419, respectively.
3. Lorry delivery slips worth Rs. 15,06,680 lacked duty documents, raising duty demands of Rs. 3,01,336, with no evidence of goods accounted in registers.
4. A show cause notice demanded duty of Rs. 24,72,620, confiscation of goods, and penalties, which were confirmed by the Commissioner.
5. The appellants disputed duty demand based on packing slips, claiming canceled orders and lack of evidence, citing consignee denials and absence of corroboration.
6. The appellants contested allegations of clandestine removal, emphasizing lack of evidence beyond partner statements, and cited legal precedents.
7. The appellants did not dispute shortages but attributed them to stockkeeping errors rather than clandestine activities.
8. Allegations of clandestine clearance based on lorry delivery slips were contested due to lack of consignee acknowledgments and payment evidence.
9. The appellants argued insufficient evidence on production capacity and impossibility of clandestine removal due to operational constraints.
10. Disputes over penalty imposition under Section 11AC were raised, challenging its mandatory nature based on legal interpretations.

Judgment:
The Tribunal upheld duty demands and confiscation based on admissions of clandestine removal, lack of objections to missing goods, and fraudulent conduct. Penalties under Section 11AC were reduced to Rs. 5 Lakhs, and partner penalties were upheld due to active involvement in removal activities. The appeals were disposed of accordingly, emphasizing the seriousness of the offenses and the need for appropriate penalties.