2015 (11) TMI 1475 - AT - Central Excise

Waiver of pre deposit - Duty demand - Clandestine removal of goods - Shortage of finished goods - Recovery of kachcha parchis - Held that - The copies of few Kachcha parchis which have been placed on record as well as the photocopies of the same have been reproduced in the impugned order, do show the supply having been made from Saidpur indicating that under those Kachcha parchis, the goods mentioned therein have been supplied from the factory premises of HRE/HVRI located at Saidpur Village in Distt. Sonepat. The appellant have also not disputed the department s contention that in respect of the Kachcha parchis mentioned in Annexure B to the show cause notice, the details mentioned therein tally with the duty paid invoices issued by HRE/HVRI. Similarly, the fact that in respect of the Kachcha parchis mentioned in Annexure C to the show cause notice, the details of the parchis tally with the invoices issued by HRE/HVRI except for the quantity mentioned in Kachcha parchis being higher than the quantity mentioned in the invoices, has also not been disputed. Therefore, there is some substance in the Department s allegation that the Kachcha parchis whose details are given in Annexure A, B & C to the show cause notice pertaine to the clearances made from HRE/HVRI. Besides this, we also find in respect of some of the entries mentioned under the head stock out in the loose papers/registers recovered from the residential premises of Bansal Brothers, the details of the clearances tally with the details of the duty paid invoices and Kachcha parchis and therefore, prima facie, the entries under stock out heading also pertains to clearance from HRE/HVRI. In view of this factual matrix, notwithstanding the fact that all the Kachcha parchis and the documents on the basis of which the duty demand has been quantified have not been supplied to the appellant and the cross-examination of the customers whose statement has been relied upon has not been allowed and as such there appears to be violation of the principles of the natural justice, the order as such cannot be said to be totally unsustainable, and in any case there would be some duty demand against the appellant. Even though, there appears to be violation of the principles of principles of natural justice, in our view, still there would be some duty demand which ultimately would be confirmed against the assessee, and therefore, to that extent the interest of the Revenue has to be safeguarded. We also take note of the fact that while the appellant s Counsel plead that all the Kachcha parchis do not have the remarks indicating supplies having been made from Saidpur factory, they have not disputed the fact that the details of the Kachcha parchis detailed in annexure B to the show cause notice fully tally with the corresponding details of the duty paid invoices issued by HRE/HVRI and similarly, the derails of the Kachcha parchis mentioned in Annexure C to the Show cause notice tally with the details of invoices issued by HRE/HVRI except for the difference in the quantity. In view of this, we hold that this is not the case for total and unconditional waiver from the requirement of pre-deposit. - Partial stay granted.

Summary

Issues Involved:
1. Duty demand based on Kachcha parchis and other documents.
2. Violation of principles of natural justice.
3. Capacity to manufacture and unaccounted purchases.
4. Cross-examination of witnesses.
5. Requirement of pre-deposit for appeal.

Detailed Analysis:

1. Duty Demand Based on Kachcha Parchis and Other Documents:
The main appellant, M/s. HVRI Industries Pvt. Ltd. (HVRI), is accused of clandestine clearances of lead products without payment of duty. The duty demand is based on Kachcha parchis, loose papers, and registers seized from the residential premises of the Bansal brothers and the factory premises of Indian Steel Corporation (ISC). The total duty demand amounts to Rs. 6,37,35,488/- for the period from August 2007 to November 2010. The Commissioner confirmed the duty demands and imposed penalties under sections 11AB and 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 2002.

2. Violation of Principles of Natural Justice:
The appellants argued that the duty demand is based on documents recovered from places other than the factory premises of HVRI/HRE, with no incriminating documents found in the factory itself. They contended that not all Kachcha parchis and documents were supplied to them, denying them the opportunity to rebut the allegations. Additionally, the request for cross-examination of witnesses whose statements were relied upon was denied, violating the principles of natural justice.

3. Capacity to Manufacture and Unaccounted Purchases:
The appellants argued that HVRI/HRE did not have the capacity to manufacture the quantity of lead products alleged to have been cleared without payment of duty. They claimed that no inquiry was conducted with the suppliers of raw materials, and there was no evidence of unaccounted purchases or manufacture. The appellants also provided data on electricity consumption, showing no abnormal usage during the disputed period.

4. Cross-Examination of Witnesses:
The appellants emphasized the importance of cross-examining the customers who allegedly confirmed purchasing lead products without payment of duty. They cited the provisions of section 9D of the Central Excise Act, 1944, and the judgment in J & K Cigarettes vs. CCE, arguing that cross-examination is mandatory. The denial of cross-examination was a significant point of contention.

5. Requirement of Pre-Deposit for Appeal:
The Tribunal considered the submissions from both sides and acknowledged the violation of principles of natural justice. However, it noted that there would still be some duty demand against the appellants. The Tribunal directed HVRI to deposit Rs. 1.50 Crore within eight weeks, waiving the requirement of pre-deposit for the balance amount of duty, interest, and penalties. The pre-deposit requirement for penalties imposed on other noticees was also waived.

Conclusion:
The Tribunal's order addressed the issues of duty demand, violation of natural justice, manufacturing capacity, cross-examination of witnesses, and pre-deposit requirements. The Tribunal directed a partial pre-deposit while acknowledging potential violations of natural justice, ensuring that the interests of both the appellants and the Revenue were safeguarded.