2015 (4) TMI 691 - AT - Central Excise

Demand of duty - Clandestine removal of goods - Clearance of goods without accountal and payment of duty - Confiscation of goods - Held that - The appellant manufacture industrial and decorative laminates and there is no dispute that more than 90% of the production is supplied to Indian Railways either directly or through dealers and through M/s.Shaktri Sales and M/s.P.A. Sales. There is no dispute that supply to Railways of the laminates are against the contract of the Indian Railways with CPPL and with M/s. P.A. Sales and M/s. Shakti Sales, in terms of which the laminates of only 3mm. thickness are to be supplied and were to be subjected pre-delivery inspection by RITES/DGS&D in the factory premises of CPPL. Therefore, there is no possibility that the laminates of below 3 mm. could have been supplied by CPPL to Railways in violation of the contract terms. However, there is huge difference between the quantity of the laminates supplied by CPPL to Indian Railways either directly or through M/s.P.A. Sales and M/s.Shakti Sales and the quantity manufactured by them as per the RG-I Register. According to the appellant, the balance quantity had been procured by them from several dealers through M/s.Aar Em Plywood and Sunmica and M/s. Ratnakar Enterprises. However, all the dealers from whom the laminates are claimed to have been purchased, have on inquiry stated that they had supplied the laminates of 0.6 mm. to 1.5 mm. thickness only and, therefore, the appellant s claim that the quantity of laminates supplied to Railways in excess of the quantity whose production is recorded by them during the period of dispute, had been procured by them from various dealers, is false. Absolutely no explanation in this regard had been given by the appellant. - it has to be presumed that the quantity of the laminates of 3 mm. thickness, which had been supplied by the CPPL either directly or through M/s.P.A.Sales and M/s. Shakti Sales to Indian Railways during the period of dispute, which is in excess of the quantity whose production was recorded by them during that period in the RG-I Register, had actually been manufactured by them without accountal and had been cleared without payment of duty under the guise of trading activity. - No infirmity in impugned order - Decided against assessee.

Summary

Issues:
Alleged duty evasion by manufacturing company supplying laminates to Indian Railways through trading activity.

Analysis:
The case involved M/s. Chandravati Polymers Pvt. Ltd. (CPPL) manufacturing industrial and decorative laminates chargeable to central excise duty under Heading No. 3920.37. The main issue revolved around the discrepancy between the quantity of laminates supplied to Indian Railways and the quantity manufactured by CPPL as per their records during the period of dispute from 14.01.91 to 30.11.95. The Directorate General of Central Excise Intelligence (DGCEI) found that laminates supplied to Railways were of 3mm thickness, subject to pre-delivery inspection, while CPPL had procured laminates of varying thickness from traders. This led to a duty demand of Rs. 2,10,56,785 against CPPL under Section 11A(1) of the Central Excise Act, 1955, with penalties imposed on various individuals and entities associated with CPPL.

The tribunal noted that over 90% of CPPL's production was supplied to Indian Railways, either directly or through dealers. The supply was contractually bound to 3mm thickness laminates with pre-delivery inspection by RITES/DGS&D. Despite CPPL claiming the excess quantity supplied to Railways was procured from dealers through trading activity, all dealers confirmed supplying laminates of 0.6mm to 1.5mm thickness only. The tribunal found no evidence supporting CPPL's claim and highlighted the non-appearance of appellants during multiple hearing opportunities. Consequently, the tribunal concluded that the excess laminates supplied to Railways, beyond recorded production, were clandestinely manufactured by CPPL without duty payment under the guise of trading activity. As a result, the tribunal dismissed the appeals, upholding the duty demand and penalties imposed.

In conclusion, the judgment highlighted the importance of maintaining accurate records and complying with contractual obligations in manufacturing and supply activities subject to excise duty. The case underscored the consequences of non-compliance and the burden of proof on the appellants to substantiate claims in the face of discrepancies uncovered during official investigations.