2006 (8) TMI 513 - AT - Central Excise

Issues Involved:
1. Excess purchase and consumption of raw material.
2. Excess consumption of electricity.
3. Statements of workers regarding excess production.
4. Comparison of Bank statements with statutory records.
5. Evidence from transporters regarding excess quantity.
6. Evidence of excess quantity from dealers or the assessee.
7. Octroi Receipts.
8. Statement of persons preparing Daily Production Report.
9. Seizure of unaccounted goods.
10. Department has ignored certain statements.
11. Maintenance of two separate registers by M/s. Loguss Auto.
12. Imposition of penalty on the concerned establishments and persons.
13. Suppression of facts and clandestine removal.

Detailed Analysis:

1. Excess Purchase and Consumption of Raw Material:
The Commissioner (Appeals) accepted the respondent's contention that there was no excess production or clandestine removal, as the Department failed to provide evidence of excess purchase and consumption of raw material.

2. Excess Consumption of Electricity:
The Department's reliance on excess electricity consumption was dismissed as it could not establish a one-to-one correlation between the manufacture of speedometers and electricity consumption.

3. Statements of Workers Regarding Excess Production:
The statements of officers controlling production planning were recorded, and it was deemed unnecessary to record statements from each worker. The Department failed to substantiate excess production through worker statements.

4. Comparison of Bank Statements with Statutory Records:
The comparison of bank statements with statutory records was considered redundant since the Department based its case on private documents, which was not justified. The respondents' bank hypothecation statements and balance sheets tallied with the RG-1 records.

5. Evidence from Transporters Regarding Excess Quantity:
The Department could not obtain evidence from transporters as the goods were not seized in transit. Hence, this point was not substantiated.

6. Evidence of Excess Quantity from Dealers or the Assessee:
The Department failed to find any evidence of excess quantities or unaccounted quantities with dealers or the assessee. The 1340 branded speedometers found during the search were accounted for in the RG-1 stock.

7. Octroi Receipts:
The Department did not investigate octroi receipts, which could have provided evidence of clandestine removal. The absence of seized goods further weakened this charge.

8. Statement of Persons Preparing Daily Production Report:
The statements of persons preparing daily production reports were not recorded. The Department's reliance on private records without corroboration was insufficient.

9. Seizure of Unaccounted Goods:
The Department's failure to seize unaccounted goods or provide direct evidence weakened their case. The 1232 branded speedometers seized from Ashvee Motors were claimed to be part of a legitimate supply, and the Department did not verify this.

10. Department has Ignored Certain Statements:
The Department ignored statements from key individuals like Mr. R.S. Ranawat, which could have provided critical insights. This omission was considered a significant investigative lapse.

11. Maintenance of Two Separate Registers by M/s. Loguss Auto:
The existence of two separate registers for speedometers (one for duty-paid and one for non-duty-paid) was crucial evidence of clandestine removal. However, the respondents denied supplying speedometers without payment of duty and questioned the authenticity of the registers.

12. Imposition of Penalty on the Concerned Establishments and Persons:
The Commissioner (Appeals) erred in setting aside penalties, as the involved parties were fully aware of the evasion strategies. Key individuals like Shri Lalani, Shri Ghanekar, and Shri Sawansukha were identified as masterminds behind the operation.

13. Suppression of Facts and Clandestine Removal:
The respondents argued that all records were audited by statutory auditors and departmental officers, negating the charge of suppression. The Department's failure to establish clandestine removal beyond reasonable doubt was highlighted.

Conclusion:
The Tribunal found no merit in the Revenue's appeal. The cross-objections by the respondents were upheld, indicating a lack of substantial evidence to support the Department's charges. The appeal was rejected, and the order of the Commissioner (Appeals) was upheld. The denial of cross-examination and investigative lapses were deemed fatal to the Revenue's case. The judgment emphasized the importance of corroborative evidence and proper procedural adherence in establishing charges of clandestine removal.

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