2014 (8) TMI 529 - AT - Central Excise

Search and Seizure of goods - Discrepancy in RG-1 Register - clandestine manufacture and clearance of fabrics - Held that - Dyeing Master Shri Harbans Lal during the course of adjudication, accepted that the entries made in the diaries belonged to him and were relating to his business transactions. Commissioner (Appeals) also took into consideration the retraction made by the appellant by way of sending telegram. He also took into consideration that appellants have no capacity to manufacture such a huge quantity of poly fabrics - entries made in the private note book read with statement cannot be held to be evidence so as to conclude against the assessee - Following decision of M/s. K. Rajagopal Vs. Commissioner of Central Excise, Madurai 2002 (1) TMI 151 - CEGAT, CHENNAI - Decided against Revenue.

Summary

Issues:
1. Excess dyed fabrics found during inspection.
2. Allegations of clandestine manufacture and clearance.
3. Confirmation of duty and imposition of penalties.
4. Capacity of the appellants to manufacture the alleged quantity.
5. Reliance on private diary entries as evidence.

Issue 1: Excess dyed fabrics found during inspection
The judgment states that officers found 2270 Kg. of dyed knitted polyester fabrics in excess during a visit to the factory, which led to the seizure of fabrics involving duty of Rs. 47,216. This discrepancy was a key factor in initiating proceedings against the appellants.

Issue 2: Allegations of clandestine manufacture and clearance
The officers recovered loose challans and a diary indicating transactions of dyed fabrics during the search of the factory premises. The partner of the appellant firm admitted that the entries in the diaries related to clandestine manufacture and cleared fabrics. Statements from buyers corroborated the receipt of dyed fabrics from the appellants, forming the basis for allegations of clandestine activities.

Issue 3: Confirmation of duty and imposition of penalties
Proceedings were initiated against the appellants for the confirmation of duty amounting to Rs. 23,26,594 and the imposition of penalties. The original adjudicating authority's order was set aside by the Commissioner (Appeals), leading to the Revenue's appeal against this decision.

Issue 4: Capacity of the appellants to manufacture the alleged quantity
The appellants argued that they lacked the capacity to manufacture the alleged quantity of polyester fabrics within the specified period. They highlighted their monthly duty payments post the officers' visit, emphasizing the impracticality of clearing goods involving a substantial duty amount in a short period. The judgment discusses the machinery capacity and certification presented by the appellants to support their claim.

Issue 5: Reliance on private diary entries as evidence
The Commissioner (Appeals) considered the private diary entries and the retraction made by the appellants in assessing the case. The judgment mentions the advocate's submission regarding the inadmissibility of private diary entries as concrete evidence against the appellants, citing various legal decisions supporting this argument.

In conclusion, the judgment upheld the decision of the Commissioner (Appeals) based on various factors, including the capacity assessment of the appellants, lack of concrete evidence supporting clandestine activities, and the inadmissibility of private diary entries as conclusive proof. The detailed analysis of each issue provided a comprehensive understanding of the case and the rationale behind the final decision.