2015 (4) TMI 737 - AT - Central Excise

Manufacturer - Excisability - Demand - Clandestine removal - Shortages - Job work charges - Seizure of goods - Held that - Revenue is correct to say that shortage of 4116 locks established in the reported decision aforesaid. Appellant did not place any material to suggest that the determination of cum-duty value of such locks was erroneous. When no cost sheet was placed by appellant to show the material component in each lock, labour and overhead charges incurred as well as financial expenses made, it is difficult to discard the finding on valuation made by learned Adjudicating authority. Therefore duty demand of ₹ 28,954/- on such count is confirmed. Appellant failed to provide reconciliation statement of the goods of the description found short during investigation. Once Panchnama was drawn in the presence of the witnesses, inventory found during investigation and recorded therein remain unquestionable in absence of any cogent and credible evidence to find fault in recording thereof. Plea of eye estimation fails to stand. Appellant did not provide any material to establish impossibility of manufacture of 1,49,524 locks. In absence of any technical or scientific data, it is not possible to discard the conclusion of arise of 1,49,524 locks out of shortage of goods found by investigation. - following the decision of the High Court of Madras in the case of Alagappa Cements Pvt. Ltd. Vs. CEGAT, Chennai reported in 2010 (10) TMI 131 - MADRAS HIGH COURT . When there was seizure of the locks of different description from the premises of M/s. R.P. Locks, appellant did not disclaim clearance thereof from its factory. The specification of locks seized proved that those were the manufactured goods of the appellant. When the appellant failed to produce evidence of lawful clearance of the specified description of the goods and duty payment evidence, the only inference that can be drawn is that premise of M/s. R.P. Locks was berthing place for clandestinely removed goods of the appellant. Accordingly, the demand of ₹ 1,87,015 also sustains. Revenue brought out its case clearly with evidence recorded. No doubt, there may be certain amount of arbitrariness in best judgment assessment. But the estimation itself when sustained in the first round of litigation and shortage of stock was found by Tribunal, appellant s questionable conduct came to record. The appellant therefore miserably fails to get any benefit in respect of penalty. Accordingly, even on account of penalty, the appellant fails to succeed. So far as penalty of ₹ 2,50,000/- imposed on Shri Ravi Jain is concerned, the Adjudicating Authority has not found his active involvement in the clandestine removal. It was only a presumption by Adjudicating Authority as to his no accounting made as abettor. In absence of any cogent and credible evidence of his conscious involvement and nexus, the penalty levied on him is waived. His appeal is accordingly allowed. - Decided partly in favour of assessee.

Issues Involved:
1. Re-determination of duty on 4116 locks detected short.
2. Shortage of raw material alleged to be used in the manufacture of clandestinely cleared goods.
3. Job worked value of goods escaped duty.
4. Key locks found in the premises of M/s. R.P. Locks.
5. Imposition of penalty on the appellant manufacturer and its authorized representative.

Issue-wise Detailed Analysis:

1. Re-determination of Duty on 4116 Locks Detected Short:
The Tribunal previously confirmed the shortage of 4116 locks of Harrison Brand and ordered the re-determination of their assessable value. The learned Adjudicating authority, in the re-adjudication proceeding, found that the shortage was established and re-determined the cum-duty price, arriving at a duty liability of Rs. 28,954/-. The appellant's plea for considering the value of each lock at Rs. 24.32/- was not accepted due to a lack of supporting material. The Tribunal confirmed the duty demand of Rs. 28,954/- as the appellant failed to provide any evidence to dispute the valuation.

2. Shortage of Raw Material Alleged to be Used in Manufacture of Clandestinely Cleared Goods:
The learned Adjudicating authority found a clandestine removal of 1,49,524 key locks, resulting from a shortage of 37,381 kgs of CR Strips and 4526 kgs of MS wires, and determined a duty demand of Rs. 10,51,824/-. The appellant's argument that the shortage was based on eye estimation and did not lead to the manufacture of 1,49,524 locks was rejected. The Tribunal upheld the duty demand, noting the absence of any reconciliation statement or evidence from the appellant to counter the findings. The authority's determination was supported by the decision in Alagappa Cements Pvt. Ltd. Vs. CEGAT, Chennai, which allowed for such conclusions based on shortages.

3. Job Worked Value of Goods Escaped Duty:
The learned Adjudicating authority observed that job charges amounting to Rs. 2,01,962/- were paid during the period 1996-97 to 1998-99, leading to a duty demand of Rs. 3,72,202/-. The appellant's claim that the job work was conducted within their premises and not outsourced was found baseless. The Tribunal upheld the duty demand, noting the appellant's failure to provide records or evidence of internal job work and the payments made to job workers. The authority's estimation of the value of the job-worked goods was deemed appropriate.

4. Key Locks Found in the Premises of M/s. R.P. Locks:
The learned Adjudicating authority found that the locks seized from M/s. R.P. Locks were clandestinely removed without payment of duty and determined a demand of Rs. 1,87,015/-. The appellant's alternative pleas of lawful clearance or arbitrary valuation were dismissed due to a lack of evidence. The Tribunal confirmed the duty demand, noting the appellant's failure to substantiate lawful clearance or payment of duty for the seized goods.

5. Imposition of Penalty on the Appellant Manufacturer and Its Authorized Representative:
A penalty of Rs. 16,40,095/- was imposed on the appellant manufacturer M/s. Keylocks (India) under Section 173 Q of the Central Excise Rules, 1944, and Rs. 2,50,000/- on Shri Ravi Jain for not maintaining proper accounts and abetting in clandestine removal. The Tribunal upheld the penalty on the manufacturer, citing established clandestine removal and failure to provide credible evidence to counter the allegations. However, the penalty on Shri Ravi Jain was waived due to the lack of cogent evidence of his conscious involvement in the clandestine activities.

Conclusion:
The appeal of M/s. Key Locks (India) was dismissed, and the appeal of Shri Ravi Jain was allowed.

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