2014 (10) TMI 720 - HC - Central Excise

Duty evasion - Clandestine removal of goods - Reversal of MODVAT Credit - Held that - during the period of 21.04.1999 to 26.08.1999, the appellants did job work of 1,29,430 kgs. of inputs used for the manufacture of fabric, bags and wastage for a particular period. The total weight of input used must be equal to the weight of finished product manufactured including wastage and that there is no process loss. The most vital evidence in the instant case is the job work done by the party for different customers from time to time. Department has adopted the best possible method i.e. bale weighment charts which means that the average weighment was done on the actual basis and not with hypothetical basis on purchase order etc. From the record, it also appears that the appellants claimed to have consumed 11,134 kgs. of fabrics for packing purposes but their claim had been rightly not accepted by the adjudicating authority. They never informed about this fact to the department, even no entry in this regard was made by them in the statutory records. They also did not pay the duty/reverse the Modvat Credit for this purpose. In fact, they wanted to take advantage on their own fault by not maintaining the record for captive consumption properly. Their record showed that they had no balance of fabrics after 13.8.1998. Whatever fabrics was manufactured till 13.8.1998, they consumed the same in the manufacture of cement/fertilizers bags, during the period 1.8.1998 to 13.8.1998. Similarly, on 17.08.1998, 5000 fertilizer bags were found in excess of the recorded balance and again on 19.3.1999, excess stock of 3899.8 kgs. fabric, 37,739 cement bags and 1,550 kgs. of wastage were found. This circumstance is enough to adversely reflect on the working of the appellants. Appellant has manufactured and removed the goods without payment of duty as per the details given in the order of authorities below. The circumstances goes long way coupled with other materials are sufficient to prove that there had been unaccounted production and removal of the goods in clandestine manner by the appellant during the period in question without payment of duty. When it is so, then we find no reason to interfere with the impugned order passed by the Tribunal. Hence, the same is hereby sustained - Decided against assessee.

Summary

Issues:
1. Quantum appeal and penalties related to the judgment and order passed by the Customs Excise & Service Tax Appellate Tribunal.
2. Substantial questions of law admitted by a Co-ordinate Bench.
3. Allegations of excess stock, duty demands, and penalties imposed on the appellant's company.
4. Arguments presented by the appellant-assessee's counsel regarding MODVAT credit, process loss, and suppression of actual production.
5. Counter-arguments by the department-respondent's counsel regarding process loss, clandestine removal, and weighment discrepancies.
6. Analysis of evidence, job work details, weighment methods, and discrepancies in the appellant's records.
7. Decision on substantial questions of law, penalties imposed, and dismissal of all appeals.

The judgment involves multiple issues, including a quantum appeal and penalties challenged by the appellant-assessee against the Customs Excise & Service Tax Appellate Tribunal's decision. A Co-ordinate Bench admitted substantial questions of law related to MODVAT credit, process loss, and penalties. The case revolved around allegations of excess stock, duty demands, and penalties imposed on the appellant's company for discrepancies in production records. The appellant's counsel argued for the reversal of MODVAT credit, citing process loss under Rule 57-D, and disputed allegations of suppressed production. In contrast, the department's counsel defended the findings, emphasizing process loss, clandestine removal, and weighment discrepancies.

The judgment analyzed the job work details, weighment methods, and discrepancies in the appellant's records. It was noted that the appellant failed to inform the department about losses, leading to suspicions of unaccounted production. The tribunal upheld the duty demands based on evidence of unaccounted goods removal. The judgment found the appellant liable for manufacturing and removing goods without duty payment, supported by discrepancies in production records. Consequently, the tribunal's decision was upheld, favoring the department and imposing penalties under Rule-209A of the Central Excise Rules.

In conclusion, all appeals by the appellant-assessees were dismissed based on the sustained findings and reasons provided in the tribunal's orders. The judgment affirmed the penalties imposed and upheld the decision on substantial questions of law in favor of the department, leading to the dismissal of all appeals.