2014 (6) TMI 89 - AT - Central Excise

Clandestine removal - Recovery of note book - invoice with new serial number inserted - However, on investigation it was found that pre-authenticated invoices bearing serial number from 172 to 177 were still lying blank and unused in the records of the Respondent. During the course of physical verification of finished goods in the respondent s factory, a shortage of 15,000 Kg of Ordinary Duplex Board, involving central excise duty of Rs. 21,600/ and Cess Rs. 169/-, was detected - Held that - there was recovery of a small note book from the factory premises of the Respondent which has been admitted by the authorized signatory as well as the Director of the respondent factory, to be including illicitly cleared goods both of them have admitted that the said note book contained particulars of illicitly removed excisable goods from the respondent s factory, and that this note book was being maintained to monitor the receipt of payments of against the illicitly removed excisable goods. The respondent s Director also admitted that the note book was being maintained under his directions and the parallel invoices were later destroyed. As per provisions of Sec. 36A of the Central Excise Act, the presumption is that the note book is a genuine documents and this is further fortified by the admission of the power of attorney holder that the entries therein were made by him. The appellants have not rebutted this presumption. We, therefore, hold that the Department has discharged the onus of establishing clandestine clearances of man made processed fabrics by the appellants. Duty demand, is therefore, sustainable - Following decision of Montex Dyg. & Ptg. Works Vs. Commissioner of Central Excise & Customs 2006 (11) TMI 376 - CESTAT, AHMEDABAD - Decided in favour of Revenue.

Issues Involved:
1. Legitimacy of the invoice number 173 dated 20.03.2004.
2. Detection of shortage of 15,000 Kg of Ordinary Duplex Board.
3. Recovery and evidentiary value of the note book containing details of illicit clearances.
4. Confessional statements of the respondent's employees and buyers.
5. Sufficiency of corroborative evidence to prove clandestine removal of goods.
6. Validity of the demand of central excise duty and Cess.
7. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1994.

Detailed Analysis:

1. Legitimacy of the Invoice Number 173 Dated 20.03.2004:
The Preventive Officers intercepted a truck carrying Ordinary Duplex Board under invoice number 173, which was found to have a cancelled original serial number. Upon factory inspection, pre-authenticated invoices bearing serial numbers from 172 to 177 were found blank and unused. The original adjudicating authority treated invoice number 173 as genuine, vacating the seizure of goods and the truck. However, the appellate tribunal found this decision erroneous, citing the presence of blank pre-authenticated invoices as evidence of manipulation.

2. Detection of Shortage of 15,000 Kg of Ordinary Duplex Board:
During physical verification at the respondent's factory, a shortage of 15,000 Kg of Ordinary Duplex Board was detected, involving central excise duty of Rs. 21,600/- and Cess Rs. 169/-. The respondent admitted to this shortage. The original adjudicating authority confirmed a partial demand of duty on the goods found short, treating the duty involved on the seized goods as part of the duty on goods found short.

3. Recovery and Evidentiary Value of the Note Book Containing Details of Illicit Clearances:
A small note book was recovered from the respondent's factory, containing invoice-wise particulars of clearances. The respondent's authorized signatory and Director admitted that the note book detailed illicit clearances and was maintained to monitor payments for such clearances. The appellate tribunal emphasized the substantial evidentiary value of these confessions, corroborated by the detection of shortages and the seizure of goods.

4. Confessional Statements of the Respondent's Employees and Buyers:
Statements from the respondent's employees and buyers corroborated the findings of illicit clearances. Several buyers admitted to receiving goods under duplicate invoices, which were either taken back or destroyed. The tribunal noted that these confessions, especially those from the Director and authorized signatory, carried significant weight in proving the case against the respondent.

5. Sufficiency of Corroborative Evidence to Prove Clandestine Removal of Goods:
The original adjudicating authority and the Commissioner (Appeals) had set aside substantial demand due to perceived insufficiency of corroborative evidence, as investigations were conducted with only a few buyers. However, the tribunal found that the recovery of the note book, confessional statements, and corroborative evidence from buyers sufficiently proved clandestine removal of goods. The tribunal cited several case laws supporting the reliance on such evidence to establish clandestine activities.

6. Validity of the Demand of Central Excise Duty and Cess:
The tribunal held that the demand of Rs. 16,12,463/- plus Cess Rs. 12,598/- for the period January 2004 to March 2004 was sustainable. The evidence presented, including the note book, confessional statements, and corroborative admissions from buyers, justified the demand. The tribunal referenced case laws where similar evidence was deemed sufficient to uphold demands for clandestine removal of goods.

7. Imposition of Penalty:
Given the sustainability of the demand, the tribunal imposed a penalty of Rs. 16,12,463/- under Rule 25 of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1994. The tribunal provided an option for the respondent to avail a reduced penalty of 25% if the entire duty amount, applicable interest, and 25% of the penalty were paid within 30 days from the receipt of the order.

Conclusion:
The appeal filed by the Revenue was allowed, with the tribunal reversing the decisions of the original adjudicating authority and the Commissioner (Appeals). The tribunal upheld the demand for central excise duty and Cess, imposed penalties, and emphasized the sufficiency of the evidence presented to prove the respondent's involvement in clandestine removal of excisable goods.

← Previous Next →