2012 (8) TMI 624 - HC - Central Excise

Clandestine removal Held that - Conclusion reached by the Commissioner that the appellant has indulged in suppression of production and clandestine removal appears legal and proper - When the appellant has chosen to deal in clandestine activity, the department is left with no alternative but to rely on the private records for working out the suppressed production and clandestine removal Regarding extended period of limitation Held that - If the finding of fact regarding clandestine removal of goods is not disturbed, the show cause notice cannot be held to be beyond limitation in terms of proviso to Section 11A of the Act

Issues Involved:
1. Tribunal's order based on presumptive calculations.
2. Possession of moulds for manufacturing specific tyre sizes.
3. Assumption of operating under Self Removal Procedure.
4. Reliance on an unauthenticated consumption norm list.
5. Variations in weight of tyres of the same size.
6. Reliance on extraneous materials not forming the basis of the demand.
7. Assessment of excise duty based on weight versus units.
8. Calculation of excise duty on assumed number of tyre units.
9. Time-barred demand under Section 11A of the Central Excise Act.
10. Onus of proving clandestine removal in physical control.
11. Obligation to produce private documents under Rule 173G.
12. Application of the principle laid down in Oudh Sugar Mills case.
13. Evidence of sale of tyres purportedly cleared clandestinely.
14. Best judgment assessment based on estimation in excise law.

Issue-wise Detailed Analysis:

1. Tribunal's order based on presumptive calculations:
The appellant contended that the Tribunal's order was perverse as it relied on presumptive calculations without evidence of clandestine removal. The Tribunal, however, upheld the findings of the Adjudicating Authority, which scrutinized various records and concluded that the appellant had indeed indulged in clandestine removal of goods.

2. Possession of moulds for manufacturing specific tyre sizes:
The appellant argued that the demand was based on the manufacture of 400x8 size tyres, for which they did not possess the required moulds. The Tribunal did not find this argument persuasive and upheld the differential duty demand.

3. Assumption of operating under Self Removal Procedure:
The appellant claimed that the Tribunal erroneously presumed they were operating under Self Removal Procedure, whereas they were under physical control with every clearance made under the supervision of a Central Excise Officer. The Tribunal's findings were based on the records and evidence presented, indicating discrepancies and unaccounted stock.

4. Reliance on an unauthenticated consumption norm list:
The appellant challenged the reliance on an unauthenticated list of consumption norms. The Tribunal, however, found that the appellant had not disputed the details regarding the consumption of raw materials furnished to the Rubber Board, which supported the findings of clandestine removal.

5. Variations in weight of tyres of the same size:
The appellant argued that significant variations in tyre weight were not considered, making the presumption of clandestine removal erroneous. The Tribunal noted that the appellant failed to demonstrate errors in the findings regarding excess use of raw materials and discrepancies in records.

6. Reliance on extraneous materials not forming the basis of the demand:
The appellant contended that the Tribunal relied on extraneous materials like the Batch Register and Mixing Formulation Register. The Tribunal found these private records relevant to the day-to-day activities of the appellant and indicative of unaccounted production and removal of goods.

7. Assessment of excise duty based on weight versus units:
The appellant argued that goods were assessed in units, not weight, but the demand was based on raw material consumption. The Tribunal upheld the demand, noting the discrepancies in raw material consumption and unaccounted stock.

8. Calculation of excise duty on assumed number of tyre units:
The appellant claimed the excise duty was calculated on an assumed number of tyre units without evidence of their transfer. The Tribunal found that the private records and unaccounted stock supported the conclusion of clandestine removal.

9. Time-barred demand under Section 11A of the Central Excise Act:
The appellant argued that the demand was time-barred as the show cause notice was issued beyond the limitation period. The Tribunal held that the finding of clandestine removal justified the invocation of the proviso to Section 11A, making the demand within the limitation period.

10. Onus of proving clandestine removal in physical control:
The appellant contended that the onus of proving clandestine removal was higher under physical control, and the Department failed to discharge this onus. The Tribunal found sufficient evidence of unaccounted production and removal, justifying the demand.

11. Obligation to produce private documents under Rule 173G:
The appellant argued that they were not obligated to produce private documents like the Stock Register under Rule 173G. The Tribunal noted that the private records were relevant and indicative of clandestine removal.

12. Application of the principle laid down in Oudh Sugar Mills case:
The appellant relied on the Oudh Sugar Mills case, arguing that the finding of clandestine removal was based on presumptive calculations. The Tribunal distinguished the factual situation and upheld the findings based on the evidence presented.

13. Evidence of sale of tyres purportedly cleared clandestinely:
The appellant argued that there was no evidence of the sale of tyres purportedly cleared clandestinely. The Tribunal found that the private records and unaccounted stock supported the conclusion of clandestine removal.

14. Best judgment assessment based on estimation in excise law:
The appellant contended that the demand was based on estimation, which is not permissible in excise law. The Tribunal upheld the demand, noting that the private records and discrepancies justified the conclusion of clandestine removal.

Conclusion:
The Tribunal's findings of clandestine removal of goods were upheld based on the scrutiny of various records and evidence presented. The appellant's arguments challenging the findings were not found persuasive, and the demand for differential duty and penalties was justified. The appeal was dismissed, and the Tribunal's order was affirmed.

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