2010 (7) TMI 584 - AT - Central Excise

Demand - Clandestine removal - Search - Suppression of production of H. Acid on the basis of spin flash drier reports during the period 1999-2000 and 2000-01 - SFDR is not a statutory document and is being maintained by the appellant internally for their own convenience - There is no inculpatory statement of any person admitting clandestine removal of their final product for the above said period, it does not require the support of any decisions to hold that clandestine removal being a serious charge, cannot be based upon the recovery of private registration indicating day to day production - There is also no reference as to how the consideration for the said final product allegedly removed clandestinely was made - Accordingly decided in the favour of the assessee As regards the duty confirmation of Rs. 1,48,926.00 in respect of the shortages of inputs and final products detected at the time of visit of the officers - the same is based upon the panchnama drawn at the time of the visit as duly accepted by the appellant as also upon the statement of the Directors admitting such clearances - Decided against the assessee

Summary

Issues:
Confirmation of demand for central excise duty based on clandestine removal of final product and inputs, imposition of penalty under Section 11AC, discrepancies in production records, admission of shortages and clearances, evidentiary value of spin flash drier reports, comparison of entries in SFDR and RG 1 register, absence of tangible evidence for clandestine removal, applicability of relevant case laws.

Analysis:

1. The impugned order confirmed the demand for central excise duty on the appellant for clandestine removal of final product H. Acid and inputs, while dropping certain other demands. The Commissioner's decision was based on de novo proceedings following a remand by the Tribunal due to a violation of principles of natural justice. The penalty under Section 11AC was also imposed. The appellant contended discrepancies in production records and challenged the confirmation of duty.

2. The appellant, engaged in manufacturing DASA and H. Acid, faced allegations of clandestine removal following a search at their factory and premises. Incriminating documents were found, and statements revealed shortages and clearances without duty payment. Registers recovered from an employee's premises were not pursued for demand confirmation. Records like SFDR and statements of employees formed the basis of the show cause notice issued to the appellant.

3. The appellant argued that the weight discrepancies between SFDR and RG 1 register were due to purity adjustments. They provided evidence of industry practices and explanations for the differences. The Commissioner rejected this defense, emphasizing the SFDR's detailed nature and confirming the duty demand based on minor discrepancies, disregarding purity adjustments.

4. The Tribunal analyzed the evidentiary value of SFDR, emphasizing the need for tangible evidence to support allegations of clandestine removal. Citing relevant case laws, the Tribunal highlighted the importance of positive evidence beyond private records. The absence of investigations into buyers, payment considerations, and supporting evidence led to setting aside the duty confirmation based on SFDR-RG 1 comparison.

5. Regarding the duty confirmation for shortages and clearances, the Tribunal upheld the decision based on panchnama, admissions by directors, disclosure of buyer, and cash transactions. The voluntary deposit by the appellant, along with admissions, supported the confirmation of duty demand and penalty imposition. The appeal was partially allowed and rejected based on the above analysis.

6. The judgment was pronounced on 6-7-2010 by the Appellate Tribunal CESTAT, Ahmedabad, with detailed analysis and considerations of legal principles, evidentiary value, and industry practices in the context of central excise duty demands and penalties.