2011 (7) TMI 442 - AT - Central Excise

Clandestine removals - Find that at the time of officers visit to the factory, 88184 pouches of 2 gms. each of Sapath brand gutka and 500 pouches of 1 gm. each of Desi brand gutka were found unaccounted vis a vis balance in the RG-1 Register for which the appellant have not been able to give any explanation. This non-accountal of pan masala pouches has to be looked at in the background of shortage of 456.35 kgs. of supari and non-accountal of 3016.90 kgs. of supari purchased from R.D. & Company, Lucknow. Though the appellant deny having purchased 3016.90 kgs. of supari from RD& Company, on enquiry with their Accountant, he has confirmed the supply of this quantity. Therefore, it is clear that 3473.25 kages of supari has been used for manufacture of pan masala which has not been accounted for. The fact that the appellant were induling in clandestine removals without payment of duty is also confirmed by the recovery of delivery receipts issued by M/s. Narayan Transport Company, whose proprietor, Shri Harish Chandra Singh has confirmed having received the consignment of pan masala from the appellant for transportation - unaccounted gutka pouches has been rightly confiscated and duty demand of Rs.4,96,179/- has been rightly confirmed against them and penalty has been rightly imposed on them.

Summary

Issues: Alleged duty evasion through clandestine removals of pan masala pouches without payment of duty.

Detailed Analysis:

1. Background and Seizure: The appellants, as manufacturers of Pan Masala, were visited by central excise officers who found excess stock of Gutka pouches and shortages in raw materials. Specifically, there was a shortage of supari, katha, perfume, menthol, and lamination rolls. An unaccounted purchase of 3016.90 kgs of supari from a company was detected, leading to suspicions of clandestine activities. The department alleged that this unaccounted supari was used to manufacture pan masala pouches cleared without duty payment.

2. Show Cause Notice and Adjudication: A show cause notice was issued for the confiscation of unaccounted Gutka pouches, demand of duty amounting to Rs.4,96,179/- for the alleged clandestine clearance of pan masala pouches, and imposition of a penalty on the appellant. The Addl. Commissioner, through an Order-in-Original, confiscated the seized pan masala pouches, confirmed the duty demand, and imposed a penalty of Rs.10,000/- on the appellant.

3. Appeal and Upholding of Order: The appellant appealed to the Commissioner (Appeals) who upheld the Addl. Commissioner's order. Subsequently, the appellant filed an appeal against this decision.

4. Ex Parte Decision: During the hearing, none appeared for the appellant despite receiving a notice. As per Rule 21 of the CESTAT (Procedure) Rules, the matter was decided ex parte due to the absence of the appellant.

5. Defence and Allegations: The Departmental Representative defended the impugned order, emphasizing the appellant's alleged involvement in duty evasion through clandestine clearances. The representative highlighted the unexplained excess stock of Gutka pouches, unaccounted purchase of supari, and discrepancies in transport records as evidence of the appellant's wrongdoing.

6. Judgment: The Tribunal carefully considered the submissions and records. It noted the unaccounted Gutka pouches, shortages of supari, and unexplained purchase of supari, indicating potential clandestine activities. The Tribunal found merit in the department's allegations of duty evasion and upheld the confiscation of unaccounted goods, confirmed the duty demand of Rs.4,96,179/-, and upheld the penalty imposed on the appellant. Consequently, the appeal was dismissed, affirming the impugned order.

This detailed analysis outlines the key aspects of the judgment, including the background of the case, the allegations of duty evasion, the legal proceedings, the defence presented, and the final decision of the Tribunal upholding the duty demand and penalties imposed on the appellant.