2017 (10) TMI 1049 - AT - Central Excise

Clandestine removal of raw material and finished goods - - Held that - When goods were noticed by investigation as cleared clandestinely, respondent failed to explain whether clearance thereof was made paying duty. There was difference in quantity as shown on record and as physically available during inventory. Using same invoices more than once, clearances were made and that was corroborated from the seized invoice book (sr. no. 34). The materials so seized brought out oblique motive of appellant in absence of rebuttal - Shri Khimji Kataria deposed that there was no sale but invoices were prepared for adjustment. This proved existence of parallel invoices which were prepared for clandestine clearances. Hon ble Supreme Court in the case of Union of India Versus Rajasthan Spinning & Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA has held that duty evasion should meet penalty and such evasion should also face duty demand invoking extended period of five years. Appeal allowed - decided in favor of Revenue.

Summary

Issues:
- Duty evasion through clandestine removal of raw materials and finished products
- Reliability of statements and evidence provided by the respondents
- Adjudication of duty demand, interest, and penalties
- Appeal against the order of the Commissioner (Appeals) resulting in refund
- Consideration of evaporation loss in explaining shortage of goods
- Abuse of Cenvat Credit rules and contravention of regulations

Analysis:

1. Duty Evasion and Clandestine Removal:
The case involved allegations of clandestine removal of raw materials and finished products by the respondent company. The investigation revealed discrepancies in physical stock compared to recorded stock, indicating evasion of Central Excise duty. Statements from various individuals, including the Managing Director, admitted to the clearance of goods without payment of duty, leading to a substantial duty evasion amounting to ?22,93,237.

2. Reliability of Statements and Evidence:
The Adjudicating Authority relied on statements provided by key individuals associated with the company, such as the Excise Clerk and the Managing Director. Despite attempts to retract statements, the retraction was deemed unreliable. The seized documents and statements indicated a pattern of preparing parallel invoices and maintaining unreliable records, further substantiating the allegations of duty evasion.

3. Adjudication and Appeal:
The Adjudicating Authority confirmed the duty demand along with interest and penalties, imposing a penalty of ?10,000 on the Managing Director. However, the Commissioner (Appeals) set aside the adjudication, resulting in a refund for the respondent. The Revenue appealed against this decision, seeking to reinstate the duty demand and penalties.

4. Consideration of Evaporation Loss:
The respondent argued for the allowance of 5% towards evaporation loss to explain the shortage of goods. However, the investigation findings, including the misuse of invoices and unaccounted stock, pointed towards deliberate evasion rather than losses due to evaporation.

5. Abuse of Cenvat Credit and Contravention of Rules:
The misuse of Cenvat Credit on inputs cleared without proper reversal, along with contraventions of Cenvat Credit Rules, highlighted further irregularities in the company's operations. The failure to maintain accurate records and the admission of clearing goods without following excise procedures demonstrated a systematic abuse of regulations.

6. Legal Precedents and Decision:
The decision considered legal precedents, including rulings from the Tribunal and High Court, emphasizing the consequences of duty evasion and the invocation of extended periods for duty demand and penalties. Based on the evidence and depositions, the Revenue's appeal was upheld, allowing the duty demand and penalties to be reinstated, thereby rejecting the Commissioner (Appeals) order resulting in a refund.

In conclusion, the judgment addressed multiple issues related to duty evasion, reliability of statements, regulatory compliance, and legal precedents, ultimately upholding the Revenue's appeal and reinstating the duty demand and penalties against the respondent company.