2014 (5) TMI 868 - AT - Central Excise

Duty demand - Clandestine manufacture and clearance of goods - Whether the appellants have indulged in clandestine manufacture and clearance of goods - Held that - Demand is not made only on the basis of few confessional statements made by the appellants but there are other documentary evidences also. There are evidences to the aspect that during stock taking both raw materials and finished goods were found short. The transporter of finished goods has confirmed to the clandestine removal of the goods involving Central Excise duty of Rs.10,04,619/-. The diaries No.1 to 4 maintained by the employee of the main appellant also indicate clandestine procurement of raw materials and clearances of finished goods without payment of duty. All these duty evasion indicators are further corroborated by the confessional statements of the appellant and does not leave any doubt that appellants were indulging in clandestinely manufacturing and clearing excisable goods in view of the parameters fixed by the judicial pronouncements relied upon from time to time. - Decided against the assessee. Quantification of duty liability - submission of the appellants that there is duplication of amounts during calculation of the duty demanded in the show cause notice. - Held that - As the verifications and duty calculations can only be done by the adjudicating authority, therefore the case is required to be remanded to him for necessary re-quantification of duty. Penalties under various provisions of the Central Excise Act, 1944 and Central Excise Rules, 2002 are also required to be proportionately calculated / imposed upon the appellants. For the above limited purpose, the case is remanded to the adjudicating authority to decide the issue in de-novo consideration after affording an opportunity of personal hearing to the appellants. - Decided partly in favour of assessee.

Issues Involved:
1. Whether the appellants have indulged in clandestine manufacture and clearance of goods.
2. Whether the duty determined by the Revenue is correct in view of the submissions made by the appellants.

Issue-wise Detailed Analysis:

1. Whether the appellants have indulged in clandestine manufacture and clearance of goods:
The Revenue's case is based on the recovery of incriminating documents, including four diaries, from the factory premises of the main appellant. Diaries 1 & 2 allegedly showed details of raw material purchases, while Diaries 3 & 4 showed details of finished goods sales without accounting in statutory records. The Revenue issued a show cause notice and confirmed a demand of Rs.2,02,31,209/- along with interest and penalties based on these findings. The appellants argued that the adjudicating authority erred in confirming the demands due to a lack of corroborative evidence and the denial of cross-examination of key witnesses. They cited precedents such as CCE Meerut Vs Parmarth Iron Pvt.Ltd. and M/s Sakeen Alloys Pvt. Ltd Vs CCE Ahmedabad to support their argument that there was no clandestine clearance of goods.

Upon review, it was noted that the case was not solely based on confessional statements but also on documentary evidence such as stock shortages and confirmations from transporters about clandestine removals. The Tribunal referenced its previous judgment in M/s Sakeen Alloys Pvt. Ltd, outlining indicators of clandestine removal, including excess/shortage of raw materials and finished goods, and confessional statements. The Tribunal found that the evidence on record, including discrepancies in stock and transport confirmations, corroborated the clandestine manufacture and clearance of goods.

2. Whether the duty determined by the Revenue is correct in view of the submissions made by the appellants:
The appellants contended that the demand was based on unaccounted raw material purchases recorded in Diaries 1 & 2 and argued for the exclusion of raw materials accounted for in RG23A Part I register. They claimed that the demand should be recalculated after excluding recorded raw materials and argued that some demands were duplicated. The Revenue countered that the diaries indicated only unaccounted raw materials and that the adjudicating authority had correctly calculated the duty demand.

The Tribunal observed that the diaries contained actual receipts of raw materials and that the mismatch with RG23A Part I could be due to delayed documentation. It was noted that the Revenue did not establish that Diaries 1 & 2 contained only unaccounted raw materials. The Tribunal found substance in the appellants' argument that all raw materials received were entered in the diaries and that there could be delays in taking credit in RG23A Part I. The Tribunal also noted that the Revenue failed to provide evidence of additional raw material purchases for the alleged clandestine clearances.

The Tribunal concluded that the raw materials indicated in Diaries 1 & 2 should be considered as the total quantities received, including those used for statutorily recorded goods. The Tribunal directed that the case be remanded to the adjudicating authority for re-quantification of duty after considering the appellants' arguments and allowing reasonable process loss. Penalties were to be proportionally recalculated.

Conclusion:
The Tribunal allowed the appeals to the extent indicated, remanding the case to the adjudicating authority for de-novo consideration and re-quantification of duty, with an opportunity for the appellants to be heard. The judgment emphasized the need for a thorough and fair reassessment of the duty demand and penalties based on the totality of evidence and submissions presented.

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