2013 (9) TMI 280 - AT - Central Excise

Cleared Goods Without Duty Payment - Revenue was of the view the appellant had processed grey fabrics and cleared the same without payment of duty in contravention of the provisions of Act and Rules - Held that - The appellant and also the evidences in both the cases and submissions made by both sides to come to the conclusion that appellant s case has no merit - penalty and confiscation of the goods were set-aside - only duty demand against the appellant was sustainable Demand had been raised on the basis of statement whereby an estimate of 40% of total fabrics was alleged to have been processed by the appellant - Held that - That was only a statement made during the reply to show cause notice and personal hearing and there was no retraction of the statement by Shri Babulal Shah at any stage and a mere statement that the percentage was not acceptable without explaining any reasons or ground for the same would only be an afterthought - It was not merely a statement that had been relied upon in the case and there were many other independent evidences - Ganesh M. Verma vs. Collector of Customs (P) Mumbai 2001 (1) TMI 689 - CEGAT, KOLKATA smuggling statement of one accomplice corroborating another was admissible evidence - In the case of Kollatra Abbas Haji vs. GOI 1983 (8) TMI 60 - HIGH COURT OF KERALA AT ERNAKULAM - in quasi-judicial proceedings evidence of co-accused had evidentiary value. Shortage of Goods - Demand had been raised on the shortage found during the search at the appellants premise - Held that - Excise duty was required to be paid at the time of clearance and receipt of consideration from the customer had no relationship whatsoever - If the appellant had not received the money appellant had lien on the fabrics as per law and should have utilised the same - If he chooses to violate the law and supplied goods, he had to take the consequences for removing the goods without payment of duty. Excess Quantity of Processed Fabric - Demand had been raised on excess quantity of processed fabric found in the premise of the appellant without any final entry in the RG-1 Register Held that - In any case if the lot was not approved by the manufacturer the same need not have been entered into any register -There was temporary entry and there were entries in raw material register and lot register, would show bonafides of the assessee - the lot of processed fabrics was pending approval from the merchant manufacturer. Demand on Seized Fabric - Demands were raised on quantities of processed fabric seized at the shop and premises Held that - The way appellants had followed the law as regards Central Excise law and Procedure - Decided Against Assessee.

Issues Involved:
1. Basis of duty demand on estimated percentage.
2. Shortage of processed fabrics found during the search.
3. Excess quantity of processed fabric found without final entry in RG-1 Register.
4. Processed fabric seized at the shop of M/s. Vipul.
5. Processed fabric seized at the premise of M/s. Pooja Fabrics.

Issue-Wise Detailed Analysis:

Issue A: Duty Demand Based on Estimated Percentage
- Finding: The demand was not raised on an estimated basis but on specific quantities disclosed in the statement.
- Submission: The appellant argued that the statement of Shri Babubhai Shah did not disclose any specific quantity processed by the appellant but only gave an estimate. They contended that no statutory or private documents or accounts maintained by M/s. Vipul showed such quantities obtained from the appellant. They also stated that the statement of a co-accused is not reliable unless corroborated by positive and cogent evidence.
- Analysis: The Tribunal found that the demand was based on specific quantities disclosed in the statement of Shri Babubhai Shah and corroborated by excess stock found at M/s. Vipul Traders and Pinky Fabrics. The Tribunal noted that the appellant did not seek cross-examination of the merchant manufacturer/traders, and the statements of traders had not been withdrawn. The Tribunal also referred to the Supreme Court's decision in the case of Commissioner of Sales Tax, Madhya Pradesh vs. Esufali HM Abdul Ali, which supported the use of estimates when exact quantities could not be determined.

Issue B: Shortage of Processed Fabrics Found During the Search
- Submission: The appellant claimed that the goods were cleared as per instructions of M/s. Vipul and the duty liability was paid off the next day when the amount was disbursed by Shri Babubhai to them.
- Analysis: The Tribunal held that excise duty is required to be paid at the time of clearance, irrespective of whether the appellant had received the payment from the customer. The appellant's argument that they paid the duty the next day was not acceptable as per the law.

Issue C: Excess Quantity of Processed Fabric Found Without Final Entry in RG-1 Register
- Finding: No explanation was provided during the investigation or adjudication regarding the excess quantity of processed fabric found in the premise.
- Submission: The appellant argued that the quantity of such fabric was duly entered in the lot register and raw material account. They claimed that only a temporary entry was made in the RG-1 register as the lot was pending approval from the merchant manufacturer.
- Analysis: The Tribunal found the appellant's explanation insufficient and noted that the fabrics were ready for clearance and could have been cleared without payment of duty. The entry in the RG-1 register was only with a pencil, and no final entry was made.

Issue D & E: Processed Fabric Seized at the Shop of M/s. Vipul and Premise of M/s. Pooja Fabrics
- Submission: The appellant contended that the seized fabric did not bear the name of the process house as required under the provisions of the Textile Control Order. They argued that the only evidence linking the seized fabric to the appellant was the statement of a co-accused without any independent and corroborative evidence.
- Analysis: The Tribunal found that the case of the Revenue was based on documentary evidence, seizure of fabrics, statements of the folding contractor and traders, and discrepancies in the accounts maintained by the assessee. The Tribunal noted that the statements of co-accused were admissible evidence, supported by other independent evidence.

Penalty and Confiscation:
- Additional Submissions: The appellant's counsel made additional submissions regarding penalty and confiscation of goods.
- Tribunal's Decision: The Tribunal noted that the penalty and confiscation of goods were set aside by the Hon'ble High Court of Delhi in the case of Pioneer Silk Mills vs. Union of India. Therefore, only the duty demand against the appellant was sustained.

Conclusion:
The Tribunal sustained the duty demand against the appellant, dismissing the appeals based on the evidence presented, including statements of co-accused and documentary evidence. The penalty and confiscation of goods were set aside, aligning with the precedent set by the Hon'ble High Court of Delhi.

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