2014 (8) TMI 402 - AT - Central Excise

Clandestine removal of goods - Discrepancy in stock - Excess stock of Raw material and shortage of finished goods coupled with seizure of un-accounted cash at the residential premises of Director - Duty Evasion - Held that - Allegation of duty evasion of ₹ 1,98,10,357/- against the appellant company is not merely based on oral evidence but is also based on the documents recovered from factory premises of PBPL and also from the premises of their raw-material suppliers and their customers. Though the appellant plead that certain clearances have been counted twice and that a number of persons have retracted their statement and there is denial of natural justice, all these factors can be considered only at the stage of final hearing. - Partial stay granted.

Issues Involved:
1. Alleged evasion of Central Excise duty by PBPL.
2. Seizure of unaccounted TMT bars and MS ingots.
3. Seizure of unaccounted cash from the director's residence.
4. Basis of duty demand and penalties imposed on PBPL and associated individuals.
5. Consideration of stay applications and pre-deposit requirements.

Issue-wise Detailed Analysis:

1. Alleged Evasion of Central Excise Duty by PBPL:
The company PBPL was suspected of evading Central Excise duty by underreporting raw material receipts and the manufacture and sale of finished products. Intelligence indicated large-scale evasion, leading to searches and seizures at PBPL's factory and associated premises.

2. Seizure of Unaccounted TMT Bars and MS Ingots:
During the search on 23.12.2009, an excess stock of 202.955 MT of TMT bars valued at Rs. 52,35,630/- was found, which was not recorded in the RG-1 Register. Additionally, there was a shortage of 250.04 MT of MS ingots valued at Rs. 61,25,980/- in the RG-23A Register. The Cenvat Credit involved in the shortage was Rs. 5,05,779/-, which PBPL debited on the same day.

3. Seizure of Unaccounted Cash from the Director's Residence:
Unaccounted cash of Rs. 22,50,000/- was recovered from the residence of PBPL's director, believed to be the sale proceeds of clandestinely cleared excisable goods. This cash was seized under the reasonable belief of its liability for confiscation under Section 12 of the Customs Act, 1962, as applicable to Central Excise matters.

4. Basis of Duty Demand and Penalties Imposed on PBPL and Associated Individuals:
The duty demand of Rs. 1,98,10,357/- was based on documents and information retrieved from CPUs/Servers and other documents seized from PBPL and associated persons. The Commissioner confirmed the duty demand and imposed penalties under Section 11AC of the Central Excise Act, 1944. Penalties were also imposed on individuals under Rule 26(1) of the Central Excise Rules, 2002, with specific amounts for different persons involved.

5. Consideration of Stay Applications and Pre-deposit Requirements:
The appellants argued that the duty demand was based on third-party documents and statements without allowing cross-examination, leading to a denial of natural justice. They also claimed that some duty demands were duplicated. The Tribunal, after considering the submissions, held that the evidence on record indicated PBPL's involvement in duty evasion. The Tribunal directed PBPL to deposit an additional Rs. 44 Lakh, in addition to the Rs. 24 Lakh already paid and the Rs. 22.5 Lakh seized cash, to safeguard the Revenue's interests. The requirement of pre-deposit of penalties by the individuals was waived for the hearing of their appeals.

Conclusion:
The Tribunal, while acknowledging the evidence of duty evasion, imposed conditions for the stay of recovery, ensuring the interests of the Revenue are safeguarded during the appeal process. The detailed analysis of the issues reflects the Tribunal's consideration of both procedural fairness and substantive evidence.

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