2011 (5) TMI 896 - AT - Central Excise

Summary

Issues Involved:
1. Seizure of goods.
2. Main demand of duty.
3. Computer print-outs as evidence.
4. Proceedings by the Karnataka Commercial Taxes Department.
5. Railway receipts as evidence.
6. Penalties imposed on individuals.

Detailed Analysis:

1. Seizure of Goods:
The seizure involved 65 kgs of packing material, 125 empty cotton bags, and quantities of Hira branded gutkha. The appellant argued that the excess packing materials included the weight of cones, and that the onus was on the department to prove that the seized gutkha had not suffered excise duty. The Commissioner found that the owners failed to establish licit possession and thus confiscated the goods. However, the tribunal found it unsafe to rely on retracted statements of third parties without corroborative evidence and vacated the confiscation and demand of duty on these goods.

2. Main Demand of Duty:
The Commissioner based the demand of Rs. 4.6 crores on railway receipts, sales reports from Dwarakamai Associates (DA), and other evidence suggesting clandestine clearance of gutkha. The appellant contended that the daily sales reports were not reliable, and the statements used were retracted. The tribunal held that the evidence was insufficient to prove clandestine clearance, and thus vacated the demand.

3. Computer Print-outs as Evidence:
The Commissioner relied on computer print-outs from DA showing expenses related to gutkha sales. The appellant argued that these print-outs did not meet the conditions under Section 36(B)(2) of the Central Excise Act. The tribunal found that the print-outs, even if admissible, did not reliably establish clandestine clearance by HE as there was no corroborative evidence for the figures.

4. Proceedings by the Karnataka Commercial Taxes Department:
The Commissioner relied on proceedings involving the seizure of 40 bags of gutkha by the Karnataka Commercial Taxes Department. The tribunal found that these proceedings did not implicate HE in clandestine removal of gutkha.

5. Railway Receipts as Evidence:
The Commissioner used railway receipts for consignments described as masala saunf/sweet masala saunf to infer clandestine transport of gutkha. The tribunal found that no investigation was conducted with the railway authorities or the individuals involved in these consignments, and thus the receipts were not reliable evidence for clandestine clearance by HE.

6. Penalties Imposed on Individuals:
Penalties were imposed on various individuals including the Managing Partner of HE and personnel of DA. The tribunal held that since there was no evidence of clandestine clearance by HE, the penalties on these individuals were not sustainable and were vacated.

Conclusion:
The tribunal vacated the confiscation of goods, the demand of Rs. 4.6 crores, and the penalties imposed on various individuals due to insufficient and unreliable evidence. The appeals were allowed, and the tribunal emphasized the need for corroborative evidence to substantiate allegations of clandestine clearance.