2000 (12) TMI 916 - AT - Central Excise

Summary

Issues Involved:
1. Allegation of clandestine manufacture and clearance of products.
2. Validity and reliability of evidence (issue memos) used to support the demand for duty.
3. Justification for the imposition of penalties on the appellant and its officers.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Manufacture and Clearance:
The appellants were accused of clandestine manufacture and clearance of HDPE/PP tapes, fabrics, and sacks, leading to a demand of Rs. 75,94,587/- in duty. The Commissioner dropped a portion of the demand but confirmed Rs. 44,41,664/- based on the scrutiny of seized documents. The appellants argued that their products were primarily sold to government undertakings, which availed Modvat credit, negating any motive for evading duty. They also highlighted that their records were regularly checked and no discrepancies were found, undermining the allegations of clandestine activities.

2. Validity and Reliability of Evidence (Issue Memos):
The case was primarily based on issue memos recovered from the appellants' factory. The appellants contended that these memos were internal documents meant for directing staff and did not necessarily correlate with actual dispatches, which could be split over several days. They argued that discrepancies in vehicle numbers and dates cited by the Commissioner were minor and did not substantiate the charge of clandestine removal. The Tribunal found merit in the appellants' explanation that issue memos were rough records and could not be used as sole evidence for clandestine manufacture. The Tribunal emphasized the lack of corroborative evidence such as procurement of raw materials, consumption of electricity, transportation records, or statements from buyers.

3. Justification for the Imposition of Penalties:
Penalties were imposed on the appellant under Section 11AC of the Central Excise Act, 1944, and Rule 173Q of the Central Excise Rules, 1944, along with personal penalties on the Managing Director and Assistant Manager under Rule 209A. The Tribunal found that the demand for duty and the imposition of penalties were based on assumptions and lacked substantial evidence. The Tribunal noted that the burden of proving clandestine removal lies heavily on the Revenue, which failed to provide corroborative evidence. The Tribunal cited several precedents where similar allegations were dismissed due to insufficient evidence.

Conclusion:
The Tribunal concluded that the Revenue's case was based on inferences and assumptions without substantial evidence to prove clandestine removal. The internal issue memos alone were insufficient to establish the charge. Consequently, the demand for duty and the penalties imposed were set aside, and all three appeals were allowed.