2005 (4) TMI 4 - AT - Central Excise

Cenvat Credit - Fraudulent availment of credit on inputs, Clandestine removal - Demand on the basis on note pads and loose papers

Summary

Issues:
1. Duty demand and penalties confirmed against the appellants based on shortage of inputs/finished goods and clandestine removal.
2. Wrong availment of Modvat credit on imported watch movements and clandestine removal of goods without payment of duty.

Analysis:
1. The appeals were directed against a common order-in-original confirming duty demands and penalties for different amounts against the appellants. The duty demands were based on shortages of inputs/finished goods and clandestine removal of goods. The adjudicating authority confirmed the duty demands and penalties against all the appellants.

2. Appeal No. E/2666/04-B:
- The appellant company imported mechanical watch movements and claimed Modvat credit. However, they could not use these movements in manufacturing quartz watches. The company attempted to manipulate records by erasing descriptions and falsely recording the movements as quartz. The duty demand for illegally claimed Modvat credit was rightly confirmed.
- Shortages of watch cases and quartz movements were explained by the company as being unusable and re-melted. Lack of evidence for clandestine clearance led to setting aside the duty demands related to these shortages.
- Duty demand for clandestine removal of watch cases lacked substantial evidence and was set aside due to insufficient proof of actual removal without payment of duty.

3. Appeal No. E/2667/04-B:
- The appellant firm wrongly availed Modvat credit on mechanical watch movements not used in manufacturing digital electronic watches. Duty demands for such wrong availment were rightly confirmed.
- Clandestine removal of wrist watches lacked reliable evidence, and duty demand related to it was set aside.
- Disallowing CENVAT credit on mechanical watch movements lacked substantial evidence, leading to setting aside of the duty demand. However, duty demand for imported quartz movements not received by the firm was rightly confirmed.

4. Appeal No. E/2668/04-B:
- Duty demands against the appellant firm for alleged removal of imported watch movements lacked tangible evidence. Lack of proof of removal and disposal led to setting aside these duty demands.
- The duty demands were set aside as the firm provided explanations for the movements and reversed credits when goods were removed under a different exemption.

5. Appeal No. E/2669/04-B:
- Duty demand for wrongly availing Modvat credit on watch movements and their clandestine removal was upheld based on documentary evidence. The firm admitted to the wrongful availment and manipulation of records.
- The duty demand was confirmed as the firm failed to show the use of mechanical watch movements in manufacturing watches and resorted to illegal practices.

6. The penalties imposed on the appellants were reduced in some appeals based on the modified duty demands. Penalties against specific individuals for abetting duty evasion were set aside due to a lack of evidence proving their active role.

7. The appeals were disposed of with modifications in duty demands and penalties, where applicable, based on the evidence and legal principles discussed in the judgment.