2011 (7) TMI 889 - AT - Central Excise

Search and seizure - Clandestine clearance - Notification No. 9/2000-CE dated 01/03/2000 - Held that - Non-maintenance of records in Quality Control Lab and assessee s claim of regular destruction of production card strengthens Revenue s case. - the case of clandestine removal is established against the respondent. Regarding related party - Held that allegation of Revenue are based on presumption and not on any evidence. This is a fact that both companies are private limited companies separately registered under the Companies Act. Commonality of one Director does not lead to the conclusion that they are related as per Section 4(4)(c) of Central Excise Act 1944 - Decided in favor of the assessee

Summary

Issues:
1. Demand of duty on clandestine removal of goods during a specific period.
2. Determination of related persons between two companies.
3. Eligibility of small-scale exemption for a specific period.

Analysis:

Issue 1: Demand of Duty on Clandestine Removal
The case involved appeals by Revenue against Orders-in-Appeal allowing appeals of certain entities regarding clandestine removal of goods. The goods were found during a search, not entered in the register, and believed to be meant for clandestine removal. Statements and circumstantial evidence supported the charge of clandestine removal. The appellate authority upheld the charge based on evidence, including production cards and statements. The absence of maintained records by the assessee further strengthened the Revenue's case. The charge was established against the respondent.

Issue 2: Determination of Related Persons
The second issue focused on whether the two companies involved were related persons under the Central Excise Act. The Revenue's allegations were based on presumption rather than concrete evidence. The commonality of one director between the companies did not establish a relationship as per the Act. The appellate authority's finding that the companies were not related persons was upheld, as there was no substantial evidence supporting the claim of relatedness.

Issue 3: Eligibility of Small-Scale Exemption
Regarding the eligibility of small-scale exemption for a specific period, it was found that the total value of clearance exceeded the threshold for the exemption. The inclusion of the value of clandestinely removed goods further confirmed the ineligibility of the assessee for the exemption. The Revenue's appeals were allowed, with the duty demand reduced for one entity, and penalties adjusted accordingly.

In conclusion, the judgment addressed the issues of duty on clandestine removal, determination of related persons, and eligibility for small-scale exemption. The decision was based on evidence, statements, and compliance with relevant provisions of the Central Excise Act. The appeals were allowed in favor of Revenue, with adjustments made to duty demands and penalties.