2014 (11) TMI 28 - AT - Central Excise

Clandestine removal of goods - Whether the appellant M/s Colius has clandestinely removed the goods with intent to evade duty or otherwise - Held that - through the parallel invoices, the appellant M/s Colius had cleared illicitly manufactured goods clandestinely, without entering the same into the Central Excise records and without payment of Central Excise duty which is not the case only for the 4 parallel invoices but for all the parallel invoices. appellant M/s Colius accepted that they had illicitly manufactured the goods and cleared the same in respect of 4 parallel invoices, cannot run away from the fact that they were undertaking clandestine activity of illicit manufacturing and clandestine removal of the goods. Since these facts remain un-controverted, we find that the main appellant s appeal fails and we uphold the impugned order to that extent. - Decided against the assessee. As regards the penalty imposed on Shri Somesh R. Mehra, we find that he being a power of attorney holder of M/s Colius and on his instructions entire activity was conducted, he needs to be visited with penalty and the adjudicating authority has rightly done so. At the same time, we find that since the main appellant M/s Colius is a proprietary concern and has already been visited with penalty, taking a lenient view, we reduce the penalty imposed on Shri Somesh R. Mehra - As regards the penalty imposed on M/s Maple is justified and does not require any interference.

Summary

Issues Involved:
1. Allegation of clandestine removal of goods by M/s Colius Paper Converters.
2. Validity of duty demand based on parallel RG-1 registers and invoices.
3. Legitimacy of duty demand on goods manufactured by M/s Maple Composite Containers Ltd.
4. Penalties imposed on individuals and entities involved.

Detailed Analysis:

1. Allegation of Clandestine Removal of Goods by M/s Colius Paper Converters:
The main appellant, M/s Colius Paper Converters, was investigated by the Revenue authorities, revealing that they issued parallel invoices and maintained a parallel RG-1 register without discharging duty liability. The Department's investigation found that M/s Colius cleared finished goods clandestinely without payment of duty. Statements from the Power of Attorney Holder, Shri Somesh Mehra, indicated that the parallel RG-1 register and invoices were created to show higher turnover to the bank, not for actual clearances. However, the adjudicating authority concluded that M/s Colius engaged in clandestine removal of goods, as evidenced by the maintenance of parallel statutory records and the issuance of parallel invoices.

2. Validity of Duty Demand Based on Parallel RG-1 Registers and Invoices:
The demand of Rs. 27,76,159 was based on the parallel RG-1 register and corresponding invoices. The Department's verification with consignees revealed that the goods mentioned in the parallel invoices were not received, and no CENVAT credit was taken. The Tribunal noted that there was no evidence of clandestine manufacture and clearance of goods, such as excess raw material purchase or transportation records. The Tribunal relied on the precedent set in CCE Vs Vanifab Engineers Pvt. Ltd., which held that clandestine removal cannot be established merely on records prepared for bank purposes. Thus, the charge of clandestine removal for demanding Rs. 27,76,159 was not established.

3. Legitimacy of Duty Demand on Goods Manufactured by M/s Maple Composite Containers Ltd:
The demand of Rs. 1,73,45,178 was based on the duty-paid clearances reflected in M/s Maple's ER-1 returns. The evidence showed that after December 2006, M/s Colius transferred its manufacturing activities to M/s Maple, which paid the duty and filed ER-1 returns. M/s Colius filed NIL returns as they ceased manufacturing. The Tribunal held that since M/s Maple manufactured the goods and paid the duty, demanding duty again from M/s Colius was erroneous. Additionally, the show cause notice demanding duty for the period December 2006 to April 2009 was barred by limitation.

4. Penalties Imposed on Individuals and Entities Involved:
The adjudicating authority imposed penalties on various individuals and entities:
- Shri Rakesh Patel (Authorized Signatory of M/s Colius): The Tribunal found that he acted under the instructions of Shri Somesh Mehra and was merely an employee. Therefore, the penalty imposed on him was unwarranted and was set aside.
- Shri Somesh Mehra (Power of Attorney Holder of M/s Colius): The Tribunal upheld the penalty, noting his significant role in the clandestine activities. However, it reduced the penalty to Rs. 1 lakh, considering the proprietary nature of M/s Colius.
- M/s Maple Composite Containers Ltd: The Tribunal found that M/s Maple engaged in receiving clandestinely manufactured goods without proper explanation. Therefore, the penalty imposed on M/s Maple was justified and upheld.

Conclusion:
The Tribunal concluded that the main appellant, M/s Colius, engaged in clandestine removal of goods and upheld the duty demand and penalties with certain modifications. The penalties on Shri Rakesh Patel were set aside, while the penalties on Shri Somesh Mehra were reduced. The penalty on M/s Maple was upheld. All appeals were disposed of accordingly.