1981 (1) TMI 256 - Board - Central Excise

Summary

Issues: Alleged evasion of Central Excise duty on manufacturing and sale of M.S. flats of less than 5mm thickness, imposition of penalty, reliance on statements of purchasers, lack of corroborative evidence, legality of evidence recorded by Central Excise Officers, imposition of heavy penalty without substantiated evidence.

The judgment pertains to an appeal by a steel rolling mills company against an order-in-original passed by the Collector of Central Excise, alleging evasion of Central Excise duty on the manufacturing and sale of M.S. flats of less than 5mm thickness. The company was accused of selling these flats to cycle part manufacturers under the guise of thicker flats, resulting in a shortfall of duty payment amounting to Rs. 30,997.928. The Collector imposed a penalty of Rs. 10 lakhs on the company under Rule 173Q of the Central Excise Rules, 1944.

The company contended that the goods were sold with proper documentation and that statements of purchasers were accepted without corroborative evidence. During cross-examination, purchasers admitted to purchasing similar flats from other sources as well, raising doubts on the exclusive use of thinner flats in manufacturing cycle parts. The purchasers also acknowledged subjecting the purchased goods to processes that indicated the use of thicker flats.

The company further argued that the statements recorded by Central Excise Officers were in English, while the individuals were illiterate or semi-literate, casting doubt on the voluntariness of the statements. They claimed that the evidence and conclusions relied upon by the Collector were legally unsound and insufficient.

After considering the submissions and evidence, the Board noted that the case relied solely on statements of purchasers recorded in English without independent witnesses or corroborative evidence. The Board found the allegations against the company unproven, based on presumptions and conjectures. It deemed the demand of duty and imposition of penalty unjustified due to the lack of collateral evidence.

The Board criticized the imposition of a hefty penalty disproportionate to the alleged evasion, highlighting the Collector's failure to use powers under Rule 173Q judiciously. Ultimately, the Board concluded that the allegation against the company was not established, overturning the orders for duty payment and penalty imposition. Consequently, the appeal succeeded in full, absolving the company of the accusations and penalties.