2000 (11) TMI 1216 - AT - Central Excise

Summary

Issues Involved:

1. Demand of duty u/s 11A(1) of the Central Excise Act, 1944.
2. Imposition of penalty u/s 11AC of the Central Excise Act, 1944 read with Rule 173Q of Central Excise Rules, 1944.
3. Demand of interest u/s 11AB of the Central Excise Act, 1944.
4. Validity of evidence based on diary and statements.
5. Retraction of statements and affidavits.
6. Applicability of precedents and case law.
7. Imposition of penalty for the period prior to the amendment of Section 11AC.

Summary:

1. Demand of Duty u/s 11A(1):
The Commissioner demanded a duty of Rs. 33,799,83.54 from M/s. Deena Paints Ltd. u/s 11A(1) of the Central Excise Act, 1944, citing wilful misstatement and suppression of facts to evade duty payment. The Tribunal, however, found that the department failed to provide corroborative evidence of higher raw material procurement and clandestine manufacture and removal of goods.

2. Imposition of Penalty u/s 11AC read with Rule 173Q:
A penalty equivalent to the duty amount was imposed on M/s. Deena Paints Ltd. u/s 11AC read with Rule 173Q. The Tribunal noted that penalty u/s 11AC cannot be imposed for the entire period as the section was introduced on 28.9.1996. Additionally, the penalty cannot be jointly imposed under Section 11AC and Rule 173Q.

3. Demand of Interest u/s 11AB:
Interest on the duty amount was also demanded u/s 11AB. The Tribunal, however, found no basis for this demand due to the lack of evidence supporting the clandestine manufacture and removal of goods.

4. Validity of Evidence Based on Diary and Statements:
The case was primarily based on a diary maintained by a labourer and statements from factory personnel. The Tribunal found that these alone were insufficient to prove clandestine activities without corroborative evidence of raw material procurement and higher production.

5. Retraction of Statements and Affidavits:
The statements of Shri Budh Ram and Shri V.K. Nanda were retracted and affidavits were filed. The Tribunal considered these retractions and found that the initial statements and diary entries were not corroborated by other evidence.

6. Applicability of Precedents and Case Law:
The Tribunal cited several precedents, including CCE, Meerut v. Moon Beverages Ltd., Kabra Enterprises, and Kothari Products Ltd., which established that clandestine removal must be proven with corroborative evidence. The Tribunal found that the department failed to meet this burden of proof.

7. Imposition of Penalty for the Period Prior to Amendment:
The Tribunal agreed with the appellant's argument that penalty u/s 11AC cannot be imposed for the period before the section's introduction on 28.9.1996.

Conclusion:
The Tribunal concluded that no case for the demand of duty, imposition of penalty, or charging of interest was made out. Consequently, the appeal was allowed.