2010 (12) TMI 170 - AT - Central Excise

Demand - Learned Counsel appearing on behalf of the appellants would submit that demand of duty on the ground of alleged manufacture and clandestine removal, is not sustainable as the alleged manufacturing of veneer based upon unaccounted timber logs is incorrect - The learned departmental representative on the other hand would submit that M/s. Bothra Shipping Services themselves imported consignment of wooden logs and before arrival of ships they sold logs on high sea sales to M/s. Rekung Timber Traders and Century Panels, etc - the impugned order confirming demand on both the appellants, of the duty liability arising out of manufacture and clearance of the veneers from the logs which were unaccounted, seems to be without any evidence and is on presumptions and assumptions and hence, is liable to be set aside Clubbing of clearances - Whenever there is any inter factory transfer, the financial transaction is taking place through books - it is seen that factually they are separate large manufacturing concerns and they have been purchasing their raw materials separately and Maxworth is also trading the raw materials on its own - Similarly, separate books of accounts have been maintained and each one of them have transactions with banks and other concerned authorities - Thus factually, they are not the units on papers only. Adjudicating Authority has adjusted the entire amount of cash which was recovered from the assessee was adjusted against the demand as has been confirmed by him. Subject to the adjustment of the amount which has been confirmed by us and the interest and penalty from the amount seized, the balance amount which is in the hands of the revenue needs to be returned back to the appellant.

Summary

Issues Involved:
1. Alleged clandestine manufacture and clearance of veneer from unaccounted logs.
2. Clubbing of clearances among different units to determine duty liability.

Detailed Analysis:

I. Alleged Clandestine Manufacture and Clearance of Veneer from Unaccounted Logs:

Findings and Conclusion:
The investigation by the authorities was based on survey reports from M/s. Marine Consultants & Surveyors Pvt. Ltd., indicating that DVPL and AP were consignees of certain logs. The authorities alleged that these logs were used for clandestine manufacture and clearance of veneer. However, the appellants argued that the logs were not received by them and provided documentary evidence, including High Seas Sale Agreements (HSSA) and bills of entry, showing that the logs were imported by other entities such as M/s. Rekung Timber Traders and M/s. NCC Trading Company.

The adjudicating authority, after examining the evidence, concluded that there was no sufficient proof that the logs were received by DVPL or AP. The authority noted that the survey reports alone, without corroborative evidence like statements from transporters or drivers, or proof of delivery acknowledgment, could not substantiate the claims of clandestine receipt and manufacture. The authority also highlighted the absence of evidence regarding excess electricity consumption or other inputs necessary for manufacturing the alleged excess quantities.

Judgment:
The tribunal found that the demand for duty based on alleged clandestine manufacture and clearance was not supported by adequate evidence. The reliance on unacknowledged challans and certificates from M/s. Bothra Shipping Services was insufficient to prove that the logs were delivered to DVPL or AP. The tribunal emphasized the need for corroborative evidence, which was lacking in this case. Consequently, the demand for duty on this ground was set aside.

II. Clubbing of Clearances Among Different Units:

Findings and Conclusion:
The adjudicating authority examined whether M/s. Maxworth Plywoods, M/s. Alpine Panels, and M/s. Truwoods Pvt. Ltd. were dummy units of DVPL, warranting the clubbing of their clearances for duty assessment. The authority found that each unit had its own factory premises, employees, and independent financial transactions. The units were purchasing raw materials and importing logs individually. The authority concluded that despite shared decision-making and familial connections, the units were not dummies and operated as independent entities.

The revenue challenged this finding, arguing that the units shared common facilities, staff, and decision-making, suggesting they were not truly independent. However, the tribunal noted that the revenue failed to provide substantial evidence to contradict the factual findings of the adjudicating authority. The tribunal upheld the authority's conclusion that the units were independent and their clearances could not be clubbed.

Judgment:
The tribunal rejected the revenue's appeal on the clubbing of clearances, affirming the adjudicating authority's decision that M/s. Maxworth Plywoods, M/s. Alpine Panels, and M/s. Truwoods Pvt. Ltd. were independent units. The tribunal found no evidence of common procurement, stock accounting, or manufacturing activities that would justify clubbing their clearances with DVPL.

Other Issues:

Minor Demand and Penalties:
The tribunal confirmed a minor demand of Rs. 1,02,277/- against DVPL for clearing logs to Truwood without payment of duty and upheld the corresponding penalty. However, it vacated the confiscation of plant and machinery and other combined penalties, as the primary charges of clandestine manufacture and clearance were not proven.

Return of Seized Amount:
The tribunal ordered the return of the balance amount seized from the appellants, after adjusting for the confirmed demand and penalties.

Personal Penalty:
The tribunal set aside the personal penalty imposed on Shri Sanjeev Agarwal, Director, as the main charges were not substantiated.

Summary:
The tribunal set aside the major demands and penalties related to alleged clandestine manufacture and clearance of veneer, finding the evidence insufficient. It upheld the adjudicating authority's decision not to club the clearances of the involved units, affirming their independent operations. Minor demands and penalties were confirmed, and the tribunal ordered the return of the balance seized amount to the appellants.