2012 (11) TMI 374 - HC - Central Excise

Demand of duty - allegation against the Appellants was of suppression of actual production; a clandestine removal of goods and of the fabrication of record Held that - Electricity consumed in excess is not the sole evidence on which the finding of a suppression of production and of clandestine removals has been made - Adjudicating Officer has adverted to the statements of the transporters. A finding has also been arrived at that the Appellants had procured bogus purchase invoices which were utilised to clear finished excisable goods under the pretext of these being traded goods - Appellants shall make a pre-deposit of twenty five per cents of the demand for duty

Issues Involved:
1. Justification of the Tribunal's direction to deposit 50% of the duty and 25% of the penalty.
2. Prima facie case for total waiver of pre-deposit.

Detailed Analysis:

1. Justification of the Tribunal's direction to deposit 50% of the duty and 25% of the penalty:

The appeal under Section 35G of the Central Excise Act, 1944, arose from an order by the CESTAT directing the Appellants to deposit 50% of the duty and 25% of the penalty. The Assessing Officer had confirmed a duty demand of Rs. 11.51 crores for the period between 16 December 2003 and 24 November 2008, with interest under Section 11AB, and imposed penalties under Section 11AC and Rule 25. The Tribunal's order was challenged on the grounds that it did not consider relevant material and considered irrelevant material.

The Tribunal's decision was influenced by the Supreme Court's precedents in Bhagwati Ispat Pvt. Ltd. v. C.E.E., Bhopal and Everest Rolling Mills (P) Ltd. v. C.C.E., Jaipur-I, which involved issues of clandestine removal and pre-deposit amounts. The Tribunal noted that in Bhagwati Ispat, the Supreme Court directed a deposit of one-fifth of the duty, and in Everest Rolling Mills, the Supreme Court required a pre-deposit of twenty-two percent of the duty. The Tribunal's direction for a 50% duty deposit was deemed excessive compared to these precedents.

The High Court modified the Tribunal's order, directing the Appellants to make a pre-deposit of twenty-five percent of the duty and dispensing with the penalty deposit. This modification aligned with the Supreme Court's directives in similar cases.

2. Prima facie case for total waiver of pre-deposit:

The Appellants engaged in the manufacture of MS Ingots and were accused of suppressing production, clandestine removal of goods, and fabricating records. The Department's intelligence indicated that the Appellants were evading excise duty. During an investigation, documents and statements were seized, revealing discrepancies in electricity consumption and production records.

The Commissioner of Central Excise confirmed the duty demand and penalties, finding that the Appellants had fabricated books of accounts and used bogus purchase invoices to cover up clandestine clearances. The Appellants appealed to the CESTAT, seeking a waiver of pre-deposit, but the Tribunal directed a partial deposit.

The High Court considered whether the Tribunal was justified in not granting a total waiver of pre-deposit. The Appellants argued that the Tribunal ignored relevant material and relied on irrelevant material, including experiments conducted by the Revenue and letters regarding the defective furnace. The Revenue contended that the findings of suppression, clandestine removal, and fabrication were based on substantial evidence, including electricity consumption records and statements from transporters.

The High Court found that the Adjudicating Officer's findings were prima facie established, and the Tribunal had not erred in its consideration of material. The Tribunal provided reasons for not following its earlier decision in R.A. Castings and noted the Supreme Court's directives in Bhagwati Ispat and Everest Rolling Mills.

The High Court concluded that the Tribunal's order for a 50% duty deposit was excessive and modified it to a 25% duty deposit, aligning with the Supreme Court's precedents. The appeal was disposed of with directions for the Tribunal to hear and dispose of the appeal on merits without treating the observations as conclusive.

Conclusion:

The High Court addressed the issues of the Tribunal's direction for pre-deposit and the prima facie case for total waiver. The Tribunal's order was modified to require a 25% duty deposit, considering Supreme Court precedents. The appeal was disposed of with directions for the Tribunal to proceed on merits.

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