2015 (1) TMI 31 - AT - Central Excise

Clandestine manufacture and removing final products, without payment of duty - Levy of interest and penalty - Penalty u/s 11AC r.w.s Rule 25 - Held that - Date of visit of the officers in the appellants factory, there were admitted excesses and shortages being of near about Rs. one crore of value of the materials.The recovery of loose papers led the revenue to believe that the appellant was indulging in clandestine activities. The subsequent development of the recording of all statements of Director of the company as also of their key employees as also of the author of the entries,during the course of investigations clearly lead to only one fact that appellants after recording of the statements admitting clandestine activities, was retracting the same mechanically. After each retraction,the Director as also Shri Dubey, in his subsequent statement again admitted clandestine activities.Such repeated retractions, have rightly held to be infructous and of no consequence by the adjudicating authority. Infact I find that the final statement of the said deponents have not been retracted at all. Though it is well settled law and does not require the support of any decision of the judicial or quasi-judicial courts to observe that the activities of clandestine nature are required to be proved by sufficient, tangible and positive evidence. However, the facts present in each and every case are required to be scrutinized and examined independently. As already observed, in the present case, the department has not simplicitor relied upon the statement of authorised representatives. Repeated statements of various persons stand recorded after each and every retraction. Further, the statement of Shri Dubey, admitting clandestine removal stand corroborated by Shri Manoj Kumar Jain, Director of the appellant as also by Shri Raghunandan Aggarwal and two supervisors of the company. Not only that, even the Director of the customers company M/s. Vardhman Cables has also in his initial statement, admitted having received the goods without payment of duty. No doubt the outcome of cross examination has to be given due importance but keeping in view the overall facts and circumstances of the case including the fact of alleged excess and shortages detected at the time of visit of officers, and the fact of deposit of duty, has to be taken into consideration which lead only to one and one fact of clandestine removal of the appellants final product. - Decided against assessee.

Summary

Issues:
- Confirmation of duty demand against M/s. Ganapati Rolling Mills Pvt Ltd
- Imposition of penalties under section 11 AC of the Central Excise Act, 1944
- Imposition of penalty against specific individuals

Analysis:

Confirmation of Duty Demand:
The judgment revolves around the confirmation of duty demand amounting to Rs. 8,60,474 against M/s. Ganapati Rolling Mills Pvt Ltd. The central issue stems from the discovery of unaccounted final products and raw materials during a visit to the factory by Central Excise officers. The excesses and shortages detected led to suspicions of clandestine activities by the appellant. The investigation revealed incriminating records indicating the removal of final products without payment of duty, prompting further scrutiny. Statements from key individuals, including the Manager and Director, were recorded, admitting to involvement in clandestine activities. Despite retractions, subsequent statements reaffirmed the initial admissions, leading to the conclusion of clandestine removal of goods without payment of duty.

Imposition of Penalties:
In addition to confirming the duty demand, penalties of identical amounts were imposed under section 11 AC of the Central Excise Act, 1944, along with a separate penalty of Rs. 20,000 against the Director and Manager of Ganapati Rolling Mills. The penalties were justified based on the individuals' knowledge of the goods' removal without duty payment, as evidenced by their initial statements. The judgment emphasized the repeated retractions followed by admissions, indicating a deliberate attempt to evade duty obligations. The penalties were upheld due to the clear involvement of the individuals in the clandestine activities.

Legal Arguments:
The appellant contended that the Revenue's case relied solely on statements without corroborative evidence, emphasizing the need for sufficient proof of clandestine removal. However, the Revenue argued that multiple inculpatory statements, retractions, and subsequent admissions formed a cohesive narrative supporting the allegations. The judgment highlighted the importance of scrutinizing each case independently and considered the cumulative weight of statements from various parties, including the customers' Director, in confirming the clandestine activities. The legal precedence of requiring tangible evidence for clandestine activities was acknowledged, with specific reference to relevant case law.

Conclusion:
Ultimately, the Tribunal dismissed all three appeals, upholding the duty demand confirmation and penalties imposed. The judgment emphasized the consistent pattern of admissions followed by retractions, leading to the inevitable conclusion of clandestine removal. The Director and Manager's complicity in the activities, as established through their statements, justified the penalties imposed on them. The decision underscored the need for concrete evidence in cases of clandestine activities and upheld the Revenue's actions based on the cumulative statements and circumstances surrounding the case.

This comprehensive analysis of the judgment highlights the key issues, legal arguments, and the Tribunal's decision, providing a detailed overview of the case involving duty demand confirmation and penalty imposition in the context of clandestine activities.