2014 (7) TMI 1072 - AT - Central Excise

Clandestine removal - Benefit of cum duty assessable value of illicit clearance - reduction in mandatory penalty u/s 11AC - Held that - there are various entries in the worksheet attached to the show cause notice which are either overlapping or appearing twice in the said worksheet - The entire worksheet of the Revenue indicate that the productions were done in the month of May, barring few entries, they were done from 11.05.2001 which would fall under the application filed by the appellant on 18.05.2001 indicating to operate under compounded levy scheme. There is no dispute that the main appellant had discharged the Central Excise duty liability after 18.05.2001 under compounded levy scheme and paid the duty liability through PLA. - the charge of illicit removal cannot be confirmed against the appellant on this factual matrix, which indicate that the appellant to his subsequent application made on 18.05.2001 has paid the duty under the compounded levy scheme. - Decided in favor of assessee. As regards demand of duty on illicit removal of 26,534 L.Mtrs, wherein an amount of ₹ 80,663/- has been confirmed - Held that - the purchasers of the materials M/s DCM Fabrics have clearly recorded a statement which clearly indicate that they have received this quantity of fabrics from the appellant without any duty paying documents or under cover of any invoice. - demand of duty confirmed alongwith interest and penalty - Decided partly in favor of assessee.

Issues Involved:
1. Whether the first appellate authority erred in extending the benefit of cum duty assessable value on illicit clearances and reducing the mandatory penalty under Section 11AC of the Central Excise Act, 1944.
2. Whether the demand of duty, interest, and penalties imposed on the assessee and individuals for clandestine removal of goods is sustainable.
3. Whether the miscellaneous application for urging grounds not taken in the main appeal memoranda should be allowed.

Issue-wise Detailed Analysis:

1. Cum Duty Assessable Value and Reduction of Mandatory Penalty:
The Revenue filed Appeal No.E/805/2007 challenging the first appellate authority's decision to extend the benefit of cum duty assessable value on illicit clearances and reduce the mandatory penalty under Section 11AC of the Central Excise Act, 1944. The Tribunal found that the grounds taken in the miscellaneous applications go to the root of the matter and allowed the applications for urging the grounds not taken in the main appeal memoranda.

2. Demand of Duty, Interest, and Penalties for Clandestine Removal:
The relevant facts indicate that the officers of Central Excise conducted a search and found a shortage of 1,05,993 L.Mtrs of finished man-made fabrics. The main appellant paid the duty liability within five days of detection. Following further searches and investigations, show cause notices were issued for clandestine removal of goods, demanding Central Excise duty, interest, and imposing penalties. The adjudicating authority confirmed these demands, which were upheld by the first appellate authority with partial relief granted by recalculating the duty liability on a cum-duty price.

a. Demand of Rs. 2,54,883/- on Shortages:
The appellant disputed the demand on the ground that the stock verification was conducted in a haphazard manner over 14 hours, making it impossible to verify the huge stock accurately. The Tribunal found that the stock checking was defective and no further investigation was conducted to establish clandestine clearances. The Tribunal referred to the decision in the case of Hira Steels Ltd and M/s Suzler Processors Ltd, concluding that the demand was unacceptable.

b. Demand of Rs. 15,78,888/- Based on Folding Report:
The appellant argued that the demand was based on an unreliable folding report without concrete evidence of clandestine removal. The Tribunal noted that the Department failed to provide corroborative evidence to support the allegations. The Tribunal referred to decisions in the cases of Nissan Thermoware and Tejwal Dyestuff Industries, finding that the demand was not tenable.

c. Demand of Rs. 80,663/- Based on Private Record and Statements of Co-accused:
The Tribunal upheld the demand of Rs. 80,663/- as the purchasers of the materials clearly indicated receiving the fabrics without duty-paying documents. The Tribunal found that the appellant did not make out a case for setting aside this demand.

3. Miscellaneous Application:
The Tribunal allowed the miscellaneous application, finding that the grounds taken were not new and had been agitated before the lower authorities. The Tribunal considered these grounds essential for deciding the case.

Conclusion:
The Tribunal upheld the demand of Rs. 80,663/- and imposed an equivalent penalty on the main appellant. The interest liability on this amount was also upheld. However, the Tribunal set aside the demand of Rs. 2,54,883/- and Rs. 15,78,888/- for clandestine removal of goods, finding that the evidence was insufficient and the appellant had discharged duty liability under the compounded levy scheme during the relevant period. The penalties on the individuals were reduced to a token penalty of Rs. 10,000/- each. The rest of the impugned order was set aside, and all appeals were disposed of accordingly.

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