2011 (12) TMI 610 - AT - Central Excise

Summary

Issues Involved:
1. Confiscation of goods and imposition of fines and penalties on M/s. Trishul Arcanut Granules Pvt. Ltd. (TAG), M/s. Wahab Stores, and M/s. Embee Agencies.
2. Demand of duty and penalties on TAG for alleged clandestine manufacture and clearance of goods.
3. Penalty on the Managing Director of TAG, Shri H.S. Nataraj.
4. Validity of the extended period of limitation for the demand of duty.

Detailed Analysis:

Confiscation of Goods and Imposition of Fines and Penalties:
1. Appeal No. E/559/2008 by TAG:
- Challenged the confiscation of goods, demand of duty of Rs. 2,85,634/-, and penalty of Rs. 50,000/-.
- Confiscation of goods valued at Rs. 4,59,515/- was allowed to be redeemed on payment of a fine of Rs. 50,000/-.
- Penalties of Rs. 50,000/- on TAG, Rs. 20,000/- on M/s. Embee Agencies, Rs. 10,000/- on M/s. Prakash Stores, Rs. 10,000/- on M/s. Wahab Stores, Rs. 1,000/- on M/s. Amud Stores, and Rs. 3,000/- on M/s. Veerbadrappa & Sons were imposed.

2. Appeal No. E/825/2008 by M/s. Wahab Stores:
- Challenged the imposition of a penalty of Rs. 10,000/-.

3. Appeal No. E/826/2008 by M/s. Embee Agencies:
- Challenged the imposition of a penalty of Rs. 20,000/-.

Demand of Duty and Penalties on TAG:
1. Appeal No. E/69/2008 by TAG:
- Challenged the demand of duty of Rs. 4,29,95,446/- along with interest and imposition of a penalty of equal amount under Section 11AC and a further penalty of Rs. 42 lakhs under Rule 25 of the Central Excise Rules, 2002.

2. Capacity of Production:
- Experiment on 30.12.2005 indicated each packing machine could produce 68-70 pouches per minute.
- TAG had 10 machines initially, increasing to 18 machines by 19.6.2005, and 27 machines in total by adding machines in Unit-II.
- The production capacity was significantly higher than the accounted production.

3. Procurement of Raw Materials/Packing Materials/Consumables:
- Documents indicated unaccounted purchases from M/s Sanjay Enterprises, M/s Divya Enterprises, and M/s Arun Agencies.
- TAG admitted to unaccounted purchases and destruction of private records.
- TAG's Managing Director admitted to unaccounted production and clearance of goods.

4. Unaccounted Clearances:
- Seizure of unaccounted goods from dealers.
- Admissions by dealers of purchasing goods without bills and paying in cash.

Penalty on the Managing Director of TAG:
1. Appeal No. E/70/2008 by Shri H.S. Nataraj:
- Challenged the imposition of a penalty of Rs. 5 lakhs under Rule 26 of the Central Excise Rules, 2002.
- Penalty upheld due to his involvement in the clandestine removal of goods and manipulation of records.

Validity of the Extended Period of Limitation:
1. Extended Period of Limitation:
- The show-cause notice dated 31.1.2007 was based on further investigation and evaluation of evidence.
- The extended period of limitation was justified as TAG systematically destroyed records and suppressed production.
- The decision of the Supreme Court in Nizam Sugar Factory and other relevant cases supported the invocation of the extended period of limitation.

Final Judgment:
1. Appeal No. E/669/08 by TAG:
- Demand of Rs. 9,66,224/- for 2002-03, Rs. 1,35,28,624/- for April 2003 to July 2004, and Rs. 50,05,439/- for April & May 2005 upheld.
- Penalties of equal amounts under Section 11AC upheld.
- Duty for April 2004 to March 2005 to be reworked based on production capacity.
- Penalty of Rs. 42 lakhs under Rule 25 set aside.

2. Appeal No. E/559/08:
- Confiscation of goods and redemption fine of Rs. 50,000/- upheld.
- Penalty of Rs. 50,000/- upheld.
- Demand of Rs. 2,85,634/- set aside.

3. Appeal No. E/70/2008 by Shri H.S. Nataraj:
- Penalty of Rs. 5 lakhs upheld.

4. Appeal No. E/826/08 by M/s Embee Agencies:
- Penalty of Rs. 20,000/- upheld.

5. Appeal No. E/825/08 by M/s Wahab Stores:
- Penalty of Rs. 10,000/- upheld.