2007 (7) TMI 115 - AT - Central Excise

Clandestine manufacture and removal - Department alleged on the basis of slip recovered that apart from job work the appellants manufacture and clear flats without payment of duty - But without any corroborative evidence against the appellant demand, interest and penalty set aside

Issues Involved:
1. Demand of Central Excise duty on M/s. D.P. Industries.
2. Imposition of penalties under Section 11AC and Rule 209A of the Central Excise Rules, 1944.
3. Validity of documents and statements used as evidence.
4. Allegations of clandestine manufacture and clearance without payment of duty.

Detailed Analysis:

1. Demand of Central Excise Duty on M/s. D.P. Industries:
The adjudicating authority demanded Central Excise duty amounting to Rs. 1,03,24,525/- on S.S. Flats and Bars from M/s. D.P. Industries under Rule 9(2) of the Central Excise Rules read with proviso to Section 11A of the Central Excise Act, 1944. The demand was primarily based on documents seized from Shri Hem Chand Jain, which included weighment slips, Dharamkanta slips, and ledgers. However, the Tribunal found that these documents did not conclusively prove the appellants' involvement in clandestine production and clearance. The Tribunal noted that the investigation officers failed to consult handwriting experts to ascertain the authors of the documents and did not carry out thorough investigations to locate the buyers of the flats. Consequently, the Tribunal concluded that there was no clear evidence that the slips pertained to the appellant and that the demand of duty was not sustainable.

2. Imposition of Penalties under Section 11AC and Rule 209A of the Central Excise Rules, 1944:
The adjudicating authority imposed equal penalties under Section 11AC on M/s. D.P. Industries and penalties under Rule 209A on Hem Chand Jain, Pankaj Jain, Atul Jain, and Manish Jain. The Tribunal, however, found that in the absence of proper evidence and investigation, the penalties were not sustainable. The Tribunal emphasized that the investigation did not bring out that the partners of D.P. Industries were actually involved in clandestine production and clearance. Therefore, the Tribunal set aside the penalties imposed on the appellants.

3. Validity of Documents and Statements Used as Evidence:
The Tribunal scrutinized the four documents (weighment slips, Dharamkanta slips, Neelam Ledger, and Suryakiran Ledger) relied upon by the department. The appellants contended that these documents did not belong to them and raised several contentions regarding their validity. The Tribunal found that the adjudicating authority did not properly discuss or reference these documents in the impugned order. Furthermore, the Tribunal noted that the statements of Shri Sanjay Jain, which were retracted by an affidavit, did not conclusively prove the appellants' involvement in the alleged evasion of duty. The Tribunal concluded that the documents and statements did not provide sufficient corroborative evidence to uphold the demand of duty.

4. Allegations of Clandestine Manufacture and Clearance without Payment of Duty:
The department's case was based on the premise that M/s. D.P. Industries manufactured and cleared flats without accounting them in the Central Excise records and without payment of duty. However, the Tribunal found that the investigation officers did not bring out evidence that the appellant firm actually cleared the flats without payment of duty. The Tribunal noted that the appellants received ingots from M/s. D.P. Processors Pvt. Ltd. and M/s. Ambeecee Consolidated Enterprises Pvt. Ltd. and converted them into flats on a job-work basis. The Tribunal emphasized that there was no evidence that the above units produced ingots which were not accounted for and sent them to the appellant unit. Consequently, the Tribunal concluded that the department failed to establish the appellants' involvement in clandestine manufacture and clearance beyond reasonable doubt.

Conclusion:
The Tribunal allowed the appeals and set aside the demand of duty and penalties imposed on M/s. D.P. Industries and its partners. The Tribunal emphasized that suspicion, however strong, cannot take the place of evidence, and clandestine clearance has to be established beyond reasonable doubt. The Tribunal concluded that the investigation officers failed to bring out the required evidence to confirm the demand on the alleged clearances, and therefore, the proceedings against the appellants were dropped.

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