2011 (5) TMI 419 - AT - Central Excise

Central Excise duty in respect of goods manufactured and cleared clandestinely, without payment of duty demanded and recovered u/s 11A(1). - Differential duty in respect of under valuation of copper tubes,as per record, but diverted and sold to other companies, under the delivery challans and bills of M/s. NR, a fictitious firm demanded and recovered from M/s. NE, u/s 11A (1). - held that -there are no corroborative evidences forthcoming and whatever evidence has been adduced by the department by way of gate register of M/s Blue Star, does not corroborate the case of the department. Accordingly confirmation of demand, merely based on the statements and purported entries in the private records seized during the investigation, without any corroboration, can not be legally sustained. decided in favour of Assessee Regarding differential Duty - held that -There is no correlation at all between the invoices issued by Navdeep Engineering with the recorded entries for the receipt of goods in the inward gate register of M/s. Blue Star Limited, either in terms of invoice numbers and their dates, or in terms of vehicle numbers mentioned in the invoices or in terms of quantities of goods said to have been supplied. decided in favour of Assessee.

Summary

Issues Involved:
1. Jurisdiction of the issuing authority for the show-cause notice.
2. Allegations of clandestine clearance and undervaluation of copper tubes.
3. Confirmation of demands based on statements and private records.
4. Imposition of penalties and interest.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Issuing Authority:
The appellants contended that the show-cause notice issued by the Dy. Director, Anti Evasion Central Excise Zonal Unit, Mumbai, was without jurisdiction. They argued that officers of the Directorate General of Central Excise Intelligence were appointed as Central Excise officers only vide Notification No. 38/2001-CE(N.T.) dated 26/06/2001. However, the Tribunal found this contention unfounded, citing Notification No. 215/86-CE dated 27-3-1986, which conferred powers of corresponding Central Excise Officers on the officers of the Directorate General of Anti-evasion. Thus, the Deputy Director of Anti-evasion Directorate was competent to issue the show-cause notice.

2. Allegations of Clandestine Clearance and Undervaluation:
The main charge was that M/s. Navdeep Engineering (NE) had cleared re-drawn copper tubes to M/s. Sapna Engineering (SE) and M/s. Sapna Coils (SC) at lower values and subsequently diverted these goods to reputed buyers like M/s. Blue Star Ltd., M/s. Shri Ram Refrigeration Ltd., and M/s. Kelvinator of India Ltd. at higher prices, thereby evading Central Excise duty. The department's evidence was primarily the statement of Shri Subhash Chandra Sharma and entries in private registers seized from the premises of Sapna group of companies. However, the Tribunal found no correlation between the invoices issued by NE and the entries in the inward gate register of M/s. Blue Star Ltd. There was no corroborative evidence to support the department's contention of goods diversion. The Tribunal held that the department failed to prove the case of clandestine clearance and undervaluation.

3. Confirmation of Demands Based on Statements and Private Records:
The Tribunal emphasized that demands could not be confirmed solely based on statements, especially if retracted, without corroborative evidence. The statements of Mr. Subhash Chandra Sharma, Mr. S.P. Sharma, and Mr. Manoj Sharma required corroboration from independent sources. The Tribunal cited legal precedents, including the apex court's decisions, which mandated corroboration of confessional statements. In this case, the department failed to provide corroborative evidence, and the purported entries in the private records did not substantiate the allegations. Consequently, the confirmation of demand based on these statements and records was deemed unsustainable.

4. Imposition of Penalties and Interest:
The Tribunal found that since the department failed to substantiate the demands, the imposition of penalties and interest also could not be sustained. The penalties imposed under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944, were set aside. Additionally, the demand for interest under Section 11AB was found to be incorrect as it applied only to duties payable on or after 11/05/2001, whereas the period of dispute was from 01/04/1995 to 22/07/1997.

Conclusion:
The Tribunal concluded that the department failed to establish and prove the charges made in the show-cause notice. Consequently, the order of the lower appellate authority was set aside, and the appeals filed by the appellants were allowed with consequential relief, if any.