2014 (9) TMI 660 - AT - Central Excise

Clandestine manufacture and removal of goods - Imposition of penalty - Commissioner dropped penalty and duty demand that there was no clandestine activity - Held that - demand is based on the difference between the weight of the goods mentioned in the invoices and the weight shown in the corresponding weighment slips. The Commissioner s finding is that the difference is 1% to 2% and the same may be on account of weight of the packing material and also that there is no evidence of the appellant having received any amount over and above in the invoice amount in cash. The Department s contention is that the average difference is not 1% to 2% but is much higher 4% to 5% since during the period of dispute i.e. during period from May 1992 to December 1992, the quantity of jute bags used were negligible - 2450 bags as against 35203 plastic bags used, there is no possibility of the weight increase on account of absorption of moisture by the jute bags which are hydroscopic in nature. As mentioned in para 6.2.2 of the Board s review order in some cases, the difference works out to 17.2%, 54% and 34.8% which is not possible. - matter remanded back. The Commissioner being satisfied with the respondent s explanation has dropped the demand. However, the Department s contention as explained in para 6.3 of the review order is that in the day-to-day account of the consumption of packing bags was being maintained by the respondent and in it they were mentioning the closing balance of bags after deducting the number of bags issued for packing and number of bags gone waste from the sum total of the opening balance and the bags purchased and that there is clear manipulation in the account of the packing bags and as such their plea regarding 6496 bags becoming waste is not acceptable. It is seen that the Commissioner in his findings on this issue has not discussed the evidence on record in this regard as discussed in para 6.3 of the review order and he has come to an abrupt finding that the Department s allegation regarding clandestine clearance of 715.016 M.T. of CPC during period from May 1992 to June 1993 based on the consumption of packing bags is not acceptable. Therefore, this decision of the Commissioner also has to be set aside and the matter has to be remanded to the Commissioner for denovo adjudication. Clearances of 145.1 M.T. of RPC - In respect of this quantity of RPC, the respondent had taken Modvat credit and the same had been cleared as such. According to the Revenue, in terms of the provisions of Rule 9A (3A) of the Central Excise Rules, 1944, which were in force at the material time, in such cases of clearance of Modvat credit availed input as such, an amounts equal to the duty payable on the input at the rate of duty inforce on the date of clearance was required to be paid subject to the minimum of the credit originally taken. However, I find that there was similar provision in Rule 57F (1) (ii) of the Central Excise Rules, 1944 and interpreting the provisions of this Rule Larger Bench of the Tribunal in the case of CCE, Vadodara vs. Asia Brown Boveri Ltd. (2000 (7) TMI 110 - CEGAT, NEW DELHI) has held when modvated inputs are cleared as such, only an amount equal to the Modvat credit originally taken was required to be paid. In view of this, the Commissioner s finding on this point is correct. Penalty under Rule 209A of Central Excise Rules, 1944 on Shri Amitav Chaudhary, Director and Shri G.K. Rai, General Manager of the respondent company, while the Commissioner has dropped the penal proceedings against these two persons, the Department is of the view that these persons were accountable and responsible to the respondent company at the time when evasion took place and the evasion involving the respondent company and their sister unit would not be possible without the direct involvement of three two persons and, therefore, the Commissioner has wrongly dropped the proceedings against them. The question of imposition of penalty on them under Rule 209A of Central Excise Rules would arise only if the duty demand based on difference between the invoice quantity and the quantity mentioned in the weighment slip and the duty demand based on the discrepancies in the ground of bags is upheld. Remanded back - Decided partly in favour of Revenue.

Summary

Issues Involved:
1. Duty demand on 27.527 M.T. of CPC based on discrepancies between invoice weight and weighment slips.
2. Duty demand on 715.016 M.T. of CPC based on discrepancies in the consumption of packing bags.
3. Duty demand on 145.1 M.T. of Modvat credit availed RPC cleared as such.
4. Imposition of penalty under Rule 209A of Central Excise Rules, 1944 on the Director and General Manager of the respondent company.

Issue-wise Detailed Analysis:

1. Duty Demand on 27.527 M.T. of CPC:
The first issue concerns the alleged clandestine clearances of 27.527 M.T. of Calcined Petroleum Coke (CPC) based on the difference between the weight mentioned in the invoices and the weight recorded in the corresponding weighment slips. The Commissioner initially found that the difference, which ranged from 1% to 2%, could be attributed to the weight of the packing material and noted the absence of evidence indicating that the respondent received any amount over and above the invoice amount. However, the Department contended that the average difference was significantly higher, ranging from 4% to 5%, and in some cases, even up to 54%. The Department argued that such discrepancies could not be explained by the weight of the packing material alone. The Tribunal found that the Commissioner had not adequately examined the points raised by the Department and thus remanded the matter for denovo adjudication.

2. Duty Demand on 715.016 M.T. of CPC:
The second issue pertains to the alleged clandestine clearance of 715.016 M.T. of CPC based on discrepancies in the consumption of packing bags. The Department argued that the respondent's account of the consumption of packing bags was manipulated, pointing out that the respondent's explanation regarding wastage and usage for packing of Raw Petroleum Coke (RPC) was not credible. The Commissioner had accepted the respondent's explanation and dropped the duty demand. However, the Tribunal noted that the Commissioner had not discussed the evidence on record as highlighted by the Department and thus set aside the Commissioner's decision, remanding the matter for denovo adjudication.

3. Duty Demand on 145.1 M.T. of Modvat Credit Availed RPC Cleared as Such:
The third issue involves the differential duty demand on 145.1 M.T. of RPC, which had been cleared as such after availing Modvat credit. The Department argued that, according to Rule 9A (3A) of the Central Excise Rules, 1944, an amount equal to the duty payable on the input at the rate in force on the date of clearance was required to be paid. However, the Tribunal referred to the Larger Bench judgment in the case of CCE, Vadodara vs. Asia Brown Boveri Ltd., which held that only an amount equal to the Modvat credit originally taken was required to be paid. Consequently, the Tribunal upheld the Commissioner's finding on this point.

4. Imposition of Penalty under Rule 209A:
The fourth issue concerns the imposition of penalty under Rule 209A of the Central Excise Rules, 1944 on the Director and General Manager of the respondent company. The Department argued that these individuals were directly involved in the evasion of duty and should be penalized. The Commissioner had dropped the penal proceedings against them. The Tribunal noted that the question of imposing penalties would arise only if the duty demands based on discrepancies in the weighment slips and packing bags were upheld. Therefore, this issue was also remanded to the Adjudicating Authority for reconsideration.

Conclusion:
The Tribunal upheld the Commissioner's order in respect of dropping the duty demand on the clearance of 145.1 M.T. of RPC as such. However, it set aside the Commissioner's order dropping the duty demands on 27.527 M.T. of CPC and 715.016 M.T. of CPC, as well as the decision to drop penalties under Rule 209A on the Director and General Manager. These matters were remanded to the Commissioner for denovo adjudication. The Revenue's appeal was thus partly allowed.