2007 (6) TMI 351 - AT - Central Excise

Demand - Cenvat/Modvat credit - Confiscation of excess goods - Evidence - Confessional statement - fake documents - Held that - In view of the majority order, the confirmation of demand of duty on M/s. Tejal Dyestuff Industries, excepting the demand of ₹ 55,163/- is set aside, confirmation of interest and imposition of penalty upon the appellants are set aside and confiscation of the goods is also set aside - appeal allowed.

Issues Involved:
1. Demand of duty against M/s. Tejal Dyestuff Industries.
2. Penalty imposed on M/s. Tejal Dyestuff Industries.
3. Penalty imposed on Shri Nareshbhai F. Shah.
4. Penalty imposed on Shri Heshbhai M. Shah.
5. Penalty imposed on Shri Jayeshbhai Bhimani and Shri Jignesh J. Bhimani.
6. Confiscation of excess found goods.
7. Demand of duty of Rs. 55,163/- due to shortage of finished goods and raw materials.

Issue-wise Detailed Analysis:

1. Demand of duty against M/s. Tejal Dyestuff Industries:
The main issue was whether M/s. Tejal Dyestuff Industries fraudulently availed Cenvat credit without physically receiving the inputs. The Revenue's case was primarily based on the confessional statements of the partner and employees of the appellant firm, which were later retracted. The Tribunal found that the statements alone, without corroborative evidence, were insufficient to uphold the demand. The existence of octroi receipts and payments made by cheques supported the appellant's claim of receiving the inputs. The majority opinion, led by Member (Judicial) and the President, concluded that the demand of Rs. 1,09,35,008/- could not be sustained due to lack of substantial evidence.

2. Penalty imposed on M/s. Tejal Dyestuff Industries:
Given the setting aside of the duty demand, the penalty imposed on M/s. Tejal Dyestuff Industries was also set aside. The Tribunal found that the penalties were based on the same evidence that failed to substantiate the duty demand.

3. Penalty imposed on Shri Nareshbhai F. Shah:
The penalty on Shri Nareshbhai F. Shah, partner of the appellant firm, was set aside. The Tribunal noted that the penalty on the firm itself was sufficient and that imposing a separate penalty on the partner was not required.

4. Penalty imposed on Shri Heshbhai M. Shah:
The penalty on Shri Heshbhai M. Shah, the authorized signatory, was reduced from Rs. 25,000/- to Rs. 10,000/- by Member (Technical). However, Member (Judicial) and the President found no basis for the penalty and set it aside entirely.

5. Penalty imposed on Shri Jayeshbhai Bhimani and Shri Jignesh J. Bhimani:
The penalties on Shri Jayeshbhai Bhimani and Shri Jignesh J. Bhimani were set aside. The Tribunal found that the allegations against them were based solely on the uncorroborated statement of Shri Nareshbhai F. Shah. Without independent evidence, the penalties could not be sustained.

6. Confiscation of excess found goods:
The Tribunal found the explanation provided by the appellants regarding the excess found goods to be plausible. The goods were not entered in the RG-1 register due to practical reasons related to ascertaining the real weight at the time of dispatch. The confiscation of the excess goods was set aside.

7. Demand of duty of Rs. 55,163/- due to shortage of finished goods and raw materials:
The Tribunal upheld the demand of Rs. 55,163/- for the shortage of finished goods and raw materials. The appellants did not provide a substantial challenge to this part of the order, and it was confirmed by Member (Judicial).

Final Order:
In view of the majority order, the confirmation of demand of duty on M/s. Tejal Dyestuff Industries, excepting the demand of Rs. 55,163/-, was set aside. The confirmation of interest and imposition of penalties upon the appellants were also set aside, and the confiscation of the goods was annulled. All appeals were disposed of accordingly.

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