2011 (2) TMI 29 - AT - Central Excise

Clandestine manufacture and removal - evidence on record establishes that raw materials were not accounted for - purchased without bills etc. and, therefore, material on record sufficient to prove clandestine purchase of raw materials and manufacture and removal of final product without payment of duty Demand of duty and penalty confirmed

Summary

Issues:
1. Disproportionate quantity of Sodium Silicate manufactured compared to Soda Ash consumed leading to duty demands and penalties.
2. Remand order by Tribunal for de novo consideration due to errors in calculation and lack of evidence.
3. Discrepancies in the calculation of solid and liquid sodium silicate quantities.
4. Allegations of clandestine purchase of raw materials and removal of final product without duty payment.
5. Interpretation of case law regarding evidence required to establish clandestine activities.

Issue 1:
The case involved duty demands and penalties imposed on four factories for manufacturing disproportionate quantities of Sodium Silicate compared to Soda Ash consumed. Show-cause notices were issued based on intelligence gathered during searches, leading to confirmation of demands and penalties by the Commissioner. The Tribunal remanded the cases for de novo consideration, which were decided ex-parte due to non-appearance of the assessees. The lower appellate authority set aside the adjudication order, prompting appeals by the Revenue.

Issue 2:
The Tribunal's remand order highlighted errors in the calculation methodology for estimating sodium silicate production, discrepancies in invoice consideration, lack of evidence regarding weighment, and issues with witness statements. The Tribunal emphasized the need for a detailed re-examination considering all submissions and evidence, ensuring principles of natural justice were followed. The Tribunal directed proper reconsideration of various aspects including invoices, weighment evidence, and witness statements.

Issue 3:
The case involved discrepancies in the calculation of solid and liquid sodium silicate quantities, leading to differing ratios and conclusions. The investigating officers' methodology was questioned, especially regarding the conversion of solid to liquid sodium silicate. The Tribunal noted errors in the calculation methodology and discrepancies in the quantities accounted for, leading to a reevaluation of the demands and penalties imposed.

Issue 4:
Allegations of clandestine purchase of raw materials, including soda ash and silica sand, without proper accounting and removal of final products without duty payment were central to the case. Statements from various individuals implicated in the transactions were recorded, with some changing their stand during cross-examination. The adjudicating authority relied on these statements to establish the clandestine activities, leading to the imposition of demands and penalties.

Issue 5:
The interpretation of case law regarding evidence required to establish clandestine activities was crucial. A distinction was made between the present case, where evidence of unaccounted raw materials and purchases without bills existed, and the case law cited by the Commissioner (Appeals) where additional evidence was deemed necessary. The Tribunal found the material on record sufficient to prove clandestine purchase and removal of final products without duty payment, leading to the allowance of the appeals and setting aside of the impugned orders.