2015 (11) TMI 1477 - AT - Central Excise

Waiver of pre deposit - Duty demand - Clandestine removal of goods - Shortage of goods found - violation of the principles of natural justice - copies of all the RUDs and NRUDs had not been supplied with the SCN - Held that - As regards the supply of RUDs and NRUDs, there is no dispute that the same are very large in number and probably for this reason only, the appellants were asked to collect the same from the office of Delhi Zonal Unit of DGCEI, as such a large number of documents cannot be sent by post along with show cause notice. The show cause notice had been issued on 5/5/2008 and the show cause notice itself requested the appellants to collect all the RUDs and NRUDs from DGCEI s office. The show cause notice also had an Annexure R which gave a complete list of the RUDs. From the records it is seen that the appellant took their own time in receiving the RUDs and NRUDs and only vide their letter dated 22/8/2008 addressed to ADG, DGCEI Delhi Zonal Unit informed DGCEI office that they have deputed their employee Shri Shyam Narayan to receive the RUDs and NRUDs. In the records of the case, there is an acknowledgement dated 25/8/2008 of Shri Shyam Narayan acknowledging that he has received and taken delivery of photocopies of all the RUDs as detailed in Annexure R to the show cause notice dated 5/5/2008 issued to M/s. RIL and its Director and that two sets of the records RUDs have been received. Since they, in spite of the receipt of all the RUDs and NRUDs did not submit reply to the show cause notice they cannot insist on cross-examination. In view of this the appellant s plea that the order suffers from gross violation of principles of natural justice is prima facie not acceptable. It appears that the goods purchased from the five traders have been sold to them at the higher price. Thus, from the very nature of these transactions, the same do not appear to be genuine. In respect of the service transactions also, the service recipient have denied they had any dealing with the appellants. In view of this, burden of proof proving that the income shown from trading in iron and steel items, share trading and service transactions had actually been received from such transactions would be on the appellant, but the appellant have failed to produce any evidence in this regard. We are, therefore of the prima facie view that on this point, the appellant have not able to establish prima facie case in their favour. When the appellant company has shown substantial income from trading in iron and steel items, share trading and service transactions and on enquiry these transactions were found to be bogus, it will have to be presumed that this income is from manufacturing activity. Stock taking had been conducted in presence of the appellant s representative and at that time no complaint had been made by him that the weight had been determined by the eye estimation without actual payment. Therefore, at this point, the appellant do not have prima facie case in their favour. - it is seen that in a number of cases the goods had been supplied by the appellant through Shri Ravinder Jian to certain persons and those persons also have admitted the receipt of the consignment while in respect of those sales, goods no Central Excise invoices had been issued by the appellant company. Therefore, at this stage it is difficult to say whether confirmation of this duty demand is vitiated by not permitting the cross-examination of Shri Ravinder Jain. - this is not the case for total waiver from the requirement of pre-deposit. - Partial stay granted.

Summary

Issues Involved:
1. Non-supply of Relied Upon Documents (RUDs) and Non-Relied Upon Documents (NRUDs).
2. Allegation of under-valuation of finished products.
3. Allegation of clandestine removal of goods.
4. Alleged shortage of finished products detected during stock taking.

Detailed Analysis:

Non-supply of RUDs and NRUDs:
The appellants argued that the impugned order was passed in violation of the principles of natural justice as all RUDs and NRUDs had not been supplied, and cross-examination of crucial witnesses was not allowed. The department countered that all RUDs were received by the appellants on 25/08/2008 and NRUDs on 27/01/2009. The Tribunal found that the appellants' plea of non-receipt lacked credibility and that they could not insist on cross-examination without submitting a reply to the show cause notice.

Allegation of Under-valuation:
The duty demand of Rs. 39,76,16,447/- was based on the allegation that the appellant sold goods below the cost of production while showing substantial income from trading in iron and steel items, share trading, and providing services, which were found to be bogus transactions. The Tribunal noted that the burden of proof was on the appellants to prove that the income was from genuine transactions. The appellants failed to provide cogent evidence, leading the Tribunal to presume that the income was from manufacturing activity. Thus, the appellants did not have a prima facie case in their favor regarding this duty demand.

Allegation of Clandestine Removal:
The duty demand of Rs. 4,49,06,976/- was based on documents recovered from the consignment agent of the appellant company and statements from certain buyers admitting to receiving goods without invoices. The appellants argued that the demand was based on third-party documents without corroborative evidence. However, the Tribunal found that in many cases, goods were supplied without issuing Central Excise invoices, making it difficult to say whether the duty demand was vitiated by not permitting cross-examination.

Alleged Shortage of Finished Products:
The duty demand of Rs. 8,01,391/- was based on the alleged shortage of finished goods detected during stock taking. The appellants claimed that the shortage was not real and was determined without actual weighing. The Tribunal noted that stock taking was conducted in the presence of the appellant's representative, who did not complain about the method used. Thus, the appellants did not have a prima facie case in their favor regarding this duty demand.

Conclusion:
The Tribunal directed the appellant company to deposit Rs. 8 crores within eight weeks. Upon compliance, the requirement of pre-deposit of the balance amount of duty demand, interest, and penalty would be waived, and recovery stayed. The penalties imposed under Rule 26 of the Central Excise Rules on the Managing Director and the Consignment Agent were waived for hearing their appeals. Compliance was to be reported on 29/07/2015.