2015 (9) TMI 1321 - AT - Central Excise

Clandestine removal of goods - Shortage of goods found - Imposition of penalty - Held that - There was shortage of finished goods of bars and rods weighing 36.830 MT on the date of visit of officers on 06.11.1996. The authorized representative of the appellant company clearly admitted the shortage as due to removal without accounting and without payment of duty. The use of parallel invoices for clearing unaccounted excisable goods without payment of duty stands admitted by the authorized signatory. The Director, Shri Laxmandas Manwani while admitting having authenticated the invoice book claimed that he has not given instructions to clear any goods without payment of duty. - authorized signatory has not retracted his statement. The Directors at the time of investigation merely pleaded ignorance of the day-to-day activities relating to production and clearance and that they have not directed Shri Joshi to indulge in clandestine removal. In view of the above, the duty demand amounting to ₹ 39,87,886/-on clearances relating to 1st June 1996 and 31.10.96 as well as demand of ₹ 67255/- on the shortage found are upheld. As regards the penalty imposed, I note that the provisions of procedure of section 11AC are applicable from 26.09.1996 and the amount of demand relating to the period October 1996 having been quantified as ₹ 4,08,866/-. I, therefore, reduce the penalty - Decided partly in favour of assessee.

Issues Involved:
1. Denial of cross-examination of witnesses.
2. Discrepancies in quantities shown in invoices.
3. Allegations of clandestine removal of goods.
4. Penalties imposed on the appellant company and its directors.

Issue-wise Detailed Analysis:

1. Denial of Cross-Examination of Witnesses:
The appellant contended that they were not given the opportunity to cross-examine witnesses, namely Shri Jagdish Chandra Joshi, Shri R P Srivastava, Shri Santosh Kumar Sahu, and Shri Narayan Sahu. The Adjudicating Authority denied the cross-examination request, stating that:
- Shri Jagdish Chandra Joshi, a co-noticee, admitted to the shortage in stock and the removal of goods without payment of duty. His statement under Section 14 of the Central Excise Act 1944 was not recorded under duress, and he never retracted it.
- Shri R P Srivastava, who was present during the stock verification, admitted to the removal of goods under parallel invoices. His statement was also not recorded under duress, and he did not retract it.
- Shri Santosh Kumar Sahu and Shri Narayan Sahu, labor contractors, accepted payments against two sets of bills, one for goods removed on payment of duty and the other under parallel invoices. The noticee's request for their cross-examination was deemed mechanical and without justification.

The Tribunal found the Adjudicating Authority's observations correct and upheld the denial of cross-examination.

2. Discrepancies in Quantities Shown in Invoices:
The appellant argued that there were differences in the quantities shown in the invoices as per the show cause notices and their annexures. The Tribunal reviewed the show cause notices and annexures, noting that the main allegation was that some entries were made on the backside of the invoices. The appellant failed to produce the invoices during the hearing, leading to an inference against their claim. The Tribunal held that the allegations of clandestine removal were justified by the Adjudicating Authority.

3. Allegations of Clandestine Removal of Goods:
The Tribunal examined the facts, including the shortage of 36.830 MT of finished goods found during the officers' visit on 06.11.1996. The authorized representative admitted the shortage was due to removal without accounting and payment of duty. The use of parallel invoices for unaccounted excisable goods was admitted by the authorized signatory. The Directors, while admitting to pre-authenticating the invoice book, claimed ignorance of the day-to-day activities. The Tribunal upheld the duty demand of Rs. 39,87,886/- for the period June 1996 to October 1996 and Rs. 67,255/- for the shortage found.

4. Penalties Imposed:
The Tribunal noted that the provisions of Section 11AC were applicable from 26.09.1996, and the demand for October 1996 was quantified at Rs. 4,08,866/-. Consequently, the penalty on the appellant company was reduced from Rs. 40,54,893/- to Rs. 4,08,866/-. The penalty on Shri Tulsidas Manwani, the Director, was reduced to Rs. 1 Lakh, considering his overall responsibility and the statements made by the authorized signatory.

Final Order:
a) The demand of Rs. 39,87,886/- on account of clandestine clearance of goods was confirmed.
b) The demand of Rs. 67,255/- on the shortage was confirmed, and the penalty on the appellant company was reduced to Rs. 4,08,866/-.
c) The penalty on Shri Tulsidas Manwani was reduced to Rs. 1 Lakh.

Conclusion:
The appeals were disposed of with the above terms, and the judgment was pronounced in the open court on 31.7.2015.

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