2009 (1) TMI 660 - AT - Central Excise

Summary

Issues:
1. Duty evasion through clandestine clearances.
2. Incorrect ascertainment of raw material shortage.
3. Barred by limitation.
4. Penalty imposition under different sections.
5. Correct quantification of duty due.

Analysis:

1. The case involved the evasion of duty through clandestine clearances by the appellant, a steel manufacturing company. The departmental officers discovered irregularities in the clearance of excisable goods without payment of duty, parallel invoices maintained for clandestine clearances, and discrepancies in statutory records. The appellant admitted to these activities, leading to a demand for duty payment of Rs. 13,59,087 under Section 11A(2) of the Central Excise Act. Penalties were imposed on the company and its director under various sections of the Act and Rules. The Commissioner affirmed the original authority's decision based on the evidence provided by the department and the admissions made by the appellant.

2. The appellant contested the ascertainment of raw material shortage and the subsequent calculation of duty evasion. They argued that the physical stock of raw materials was inaccurately determined without actual weighment, leading to erroneous calculations. However, the Tribunal upheld the department's method of stock assessment based on industry practices, rejecting the appellant's claim. The Tribunal also confirmed the duty demand of Rs. 4,69,404.22 for raw material utilization in the clandestine manufacture of steel bars.

3. The issue of limitation was raised regarding the Show Cause Notice issued more than a year after the officers' visit to the factory. However, the Tribunal ruled that the notice was not barred by limitation as it was issued within five years of the clandestine clearances, falling within the statutory limit for such cases.

4. Regarding penalties, the Tribunal clarified that penalties under Section 11AC could not be imposed for transactions predating its enactment. The penalty amount was adjusted based on legal precedents and the nature of the offenses committed. The penalty on the company was linked to the duty amount due on clandestine clearances made after a specific date, as per the Supreme Court's ruling. The penalty on the director was reduced to Rs. 50,000 under Rule 209A of the Central Excise Rules.

5. The Tribunal carefully reviewed the evidence, submissions, and legal provisions related to duty quantification and penalty imposition. They upheld the duty demand for raw material utilization in clandestine clearances while adjusting penalties to align with statutory requirements and judicial decisions. The appeal was partially allowed through remand for further proceedings based on the Tribunal's findings and directions.