2014 (9) TMI 961 - AT - Central Excise

Penalty u/s 11AC - Clandestine manufacture and removal of their final products - Held that - Date of visit of the officers in the appellants factory, there were admitted excesses and shortages being of near about Rs. one crore of value of the materials. The recovery of loose papers led the revenue to believe that the appellant was indulging in clandestine activities. The subsequent development of the recording of all statements of Director of the company as also of their key employees as also of the author of the entries, during the course of investigations clearly lead to only one fact that appellants after recording of the statements admitting clandestine activities, was retracting the same mechanically. After each retraction, the Director as also Shri Dubey, in his subsequent statement again admitted clandestine activities. Such repeated retractions, have rightly held to be infructous and of no consequence by the adjudicating authority. Infact I find that the final statement of the said deponents have not been retracted at all. Department has not simplicitor relied upon the statement of authorised representatives. Repeated statements of various persons stand recorded after each and every retraction. Further, the statement of Shri Dubey, admitting clandestine removal stand corroborated by Shri Manoj Kumar Jain, Director of the appellant as also by Shri Raghunandan Aggarwal and two supervisors of the company. Not only that, even the Director of the customers company M/s. Vardhman Cables has also in his initial statement, admitted having received the goods without payment of duty. No doubt the outcome of cross examination has to be given due importance but keeping in view the overall facts and circumstances of the case including the fact of alleged excess and shortages detected at the time of visit of officers, and the fact of deposit of duty, has to be taken into consideration which lead only to one and one fact of clandestine removal of the appellants final product - Decided against assessee.

Summary

Issues:
1. Duty demand confirmation against the appellant.
2. Imposition of penalties under Section 11AC of the Central Excise Act, 1944.
3. Imposition of penalties under Rule 26 of the Central Excise Rules, 2002.
4. Allegations of clandestine activities and removal of goods without payment of duty.
5. Reliability of statements made by various individuals during the investigation.
6. Corroboration of evidence to establish clandestine activities.
7. Justification of penalties imposed on the Director and Manager of the company.

Analysis:
1. The judgment addresses the confirmation of duty amounting to Rs. 8,60,474 against the appellant, M/s. Ganapati Rolling Mills Pvt., along with the imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rule 25 of the Central Excise Rules, 2002. Additionally, penalties of Rs. 20,000 were imposed on Shri Manoj Kumar Jain, Director, and Shri Lalji Dubey, Manager of the company, under Rule 26 of the Central Excise Rules, 2002.

2. The case revolves around the detection of excesses and shortages during a visit to the appellant's factory, leading to suspicions of clandestine activities. Various statements were recorded from individuals associated with the company, admitting to involvement in clandestine manufacture and removal of final products without duty payment. Despite retractions, subsequent statements reaffirmed the initial admissions, indicating a pattern of clandestine activities.

3. The appellant argued that the Revenue's case relied solely on statements without corroborative evidence. However, the Revenue contended that the statements, including those of the Director and employees, were consistent and mutually corroborative. The Tribunal noted the significant value of materials involved in the excesses and shortages, supporting the Revenue's allegations of clandestine activities.

4. The judgment emphasizes the necessity of tangible evidence to prove clandestine activities, but in this case, the repeated statements of involved individuals, including the Director, Manager, and supervisors, provided substantial corroboration. The statements of buyers from another company also confirmed the receipt of goods without duty payment, further strengthening the Revenue's case.

5. Ultimately, the Tribunal found no merit in the appeal by M/s. Ganapati Rolling Mills, upholding the duty demand confirmation and penalties. Given the consistent admissions of clandestine activities by key individuals associated with the company, the penalties imposed on the Director and Manager were deemed justified based on their knowledge of the goods' removal without duty payment.

6. The judgment, delivered on 19-9-2014 by Ms. Archana Wadhwa, Member (J) of the Appellate Tribunal CESTAT NEW DELHI, concluded that all three appeals were rejected based on the evidence and statements presented during the investigation.