2007 (2) TMI 512 - AT - Central Excise

Summary

Issues involved: Allegations of clandestine removal and manufacture of Pharmaceutical Formulations, discrepancy between Batch Manufacturing Report and Daily Stock Accounts, penalty imposition, burden of proof on the Revenue, valuation method, extended period of limitation.

The case involved appeals against OIA No. 68/2006-Central Excise regarding allegations of clandestine removal and manufacture of Pharmaceutical Formulations based on discrepancies between Batch Manufacturing Report (BMR) and Daily Stock Accounts from January 1999 to November 2001, amounting to Rs. 19,26,861/- with an equal penalty imposed.

Points urged by the Advocate:
1. Preventive Officers noticed discrepancies between BMR and Daily Stock Account, leading to duty recovery proceedings.
2. Appellants voluntarily paid duty on shortages, attributing them to invoices with the same serial numbers.
3. Challenges were raised on the basis of rejections due to physical defects in the production process.
4. Lack of evidence of excess consumption or sources of funds for clandestine activities.
5. Non-consideration of semi-finished goods stock value during the investigation.
6. Failure to appropriate the sum paid by the appellant.
7. Absence of evidence of clandestine removal or buyers.
8. Disagreement with the burden of proof placed on appellants.
9. Non-consideration of relevant legal decisions.
10. Ignored evidence provided by the appellant during the investigation.
11. Discharge of duty liability when supported by evidence.
12. Discrepancies in presumptions regarding waste and scrap in the production process.
13. Failure to exclude stock found during the investigation from duty demands.
14. Need to exclude older batches credited to stock post-investigation.
15. Admission of shortages by the MD during the investigation.
16. Objection to the valuation method used.
17. Non-consideration of quantity discounts given to stockists.
18. Disagreement with the extended period of limitation invoked.
19. Reliance on specific case laws to support contentions.

The Appellate Tribunal found that the major portion of the demand was based on discrepancies between BMR and Daily Stock Accounts, with the appellants providing valid reasons for the differences due to the nature of the production process. The burden of proof was deemed to lie with the Revenue to establish clandestine removal, and the demand of Rs. 18,19,434/- was set aside due to lack of evidence of such activities.

Regarding other demands in different Annexures, the Tribunal upheld the demand under Annexure-II but reduced the demand under Annexure-V based on the Ujagar Prints ratio. The matter was remanded to the original authority for re-computation. The penalty on the Managing Director was deemed unjustified and set aside.

In conclusion, the appeals were disposed of with the above decisions pronounced in open court at the conclusion of the hearing.