2015 (11) TMI 1034 - AT - Central Excise

Clandestine clearance of goods - SSI Exemption - Clearances of goods without making declaration to Department - Non Inclusion of value of clearance - Held that - On perusal of some of the invoices procured from the customers who had made cheque payments to M/s Batra Henlay Cables and M/s Cosmoline Electricals, it is seen that some of the invoices are in respect of supply of aluminium cables, while it is the stand of M/s Batra Henlay Cables that their unit was not capable of manufactured aluminium cables. In this regard, Shri Krishan Singh Rathore, an employee of the appellant company, in his statement dated 17/1/97 has stated that Batra Henlay Cables were manufacturing only the house wire cables and telephone cables and were not manufacturing any aluminium cables. On this point no finding has been given by the Commissioner. If M/s Batra Henlay Cables were not having any machinery for manufacture of aluminium cables, the aluminium cables sold by them must obviously have been procured by them from other dealers and accordingly the payments received in the above-mentioned four bank accounts in respect of sales of aluminium cables cannot be treated as the payments received for sale of the cables manufactured and cleared by M/s Batra Henlay Cables. No enquiry has been conducted with the remaining customers - Without any enquiry with them, it cannot be presumed that the payments made by them were in respect of the goods manufactured and cleared by M/s Batra Henlay Cables which had been sold to them. In view of this, the payments received into the four bank accounts, mentioned above, from the parties with whom no enquiry had been conducted, cannot be treated as the payments for the goods manufactured and cleared by M/s Batra Henlay Cables and those amounts cannot be taken into account for calculation of the duty demandable from M/s Batra Henlay Cables. - Commissioner s order confirming duty demand of ₹ 66,04,307/- has to be set aside and the matter has to be remanded to the Commissioner for denovo adjudication - impugned order is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Demand of Central Excise duty of Rs. 66,04,307/- based on deposits in four bank accounts.
2. Demand of Central Excise duty of Rs. 23,20,278/- based on sales made by M/s Batra Enterprises.
3. Imposition of penalties and confiscation of property.

Detailed Analysis:

Issue 1: Demand of Central Excise duty of Rs. 66,04,307/-

The duty demand of Rs. 66,04,307/- is based on the deposits in four bank accounts in the name of Shri Vinod Kumar, an employee of Grandlay Cinema, who was shown as the proprietor of M/s Batra Henlay Cables and M/s Cosmoline Electricals. The investigation revealed that these accounts were used to deposit cheques received from various customers for the sale of wires and cables, which were not accounted for in the books of M/s Batra Henlay Cables. The amounts deposited in these accounts during the disputed period totaled Rs. 2,89,47,379/-. The appellant contended that these deposits included payments for goods manufactured by job workers and not just by M/s Batra Henlay Cables. However, the Commissioner held that the appellant failed to provide evidence supporting this claim. The Tribunal noted that M/s Cosmoline Electricals is a trading firm, and without a finding that it is a fictitious entity, it cannot be presumed that all goods sold by M/s Cosmoline Electricals were manufactured by M/s Batra Henlay Cables. Additionally, some invoices pertained to aluminum cables, which M/s Batra Henlay Cables could not manufacture. The Tribunal found that the Commissioner did not adequately address these points and remanded the matter for denovo adjudication, emphasizing the need for specific findings on whether M/s Cosmoline Electricals is a fictitious entity and whether the goods sold included aluminum cables.

Issue 2: Demand of Central Excise duty of Rs. 23,20,278/-

This demand is based on the sales made by M/s Batra Enterprises to 17 customers, who in their statements confirmed purchasing Batra Henlay brand cables. The investigation found no corresponding sales from M/s Batra Henlay Cables to M/s Batra Enterprises, leading to the inference that these cables were clandestinely cleared by M/s Batra Henlay Cables. The appellant argued that the duty demand was based solely on the statements of the 17 buyers, without allowing their cross-examination, which is necessary under Section 9D of the Central Excise Act, 1944. The Tribunal agreed that cross-examination should have been allowed and remanded the matter for denovo adjudication, directing the Commissioner to permit cross-examination of the 17 buyers or follow the procedure outlined in the J&K Cigarette case for relying on their statements.

Issue 3: Imposition of penalties and confiscation of property

The Commissioner had imposed penalties on M/s Batra Henlay Cables and its partners under various sections of the Central Excise Act, 1944, and ordered the confiscation of land, building, plant, and machinery with an option to redeem on payment of a fine. The Tribunal set aside these penalties and the confiscation order, pending the outcome of the denovo adjudication on the duty demands.

Conclusion:

The Tribunal set aside the impugned order and remanded the matter to the Commissioner for denovo adjudication, ensuring compliance with the Tribunal's observations and directions, including allowing cross-examination of witnesses and addressing specific points regarding the nature of M/s Cosmoline Electricals and the capability of M/s Batra Henlay Cables to manufacture aluminum cables.