2017 (11) TMI 821 - AT - Central Excise

Clandestine Removal - bogus invoices - invoices bearing identical serial numbers - Held that - the records unearthed by the department clearly bring out clandestine production and clearance of finished goods. From the records it is also clear that the log book maintained by the said Shivachandra Kumar indicated both accounted scrap denoted as M and unaccounted scrap denoted as E . This finding has not been controverted by M/s. AKS. This being so, the contentions of the ld. counsel that there is no proof that unaccounted scrap was utilized will not succeed - the penalties imposed under section 11AC on M/s. AKS and on the kingpin of the entire modus operandi N.K. Kothari is also sustained. Penalty on N.C. Kothari, Managing Director - Held that - there is nothing on record to suggest that the said person was involved in the day to day affairs of the unit on account of ill-health and further that no other employee or other persons have implicated otherwise. For this reason, the adjudicating Commissioner, in our view, has correctly found that Shri N.C. Kothari is not liable for penalty under Rule 26 ibid. In respect of penalties on other persons, there is a clear finding by the adjudicating authority that these persons acted only on the directions of their employers, they are all only paid employees having no pecuniary or other benefit from the activities - penalty set aside. Appeal allowed in part.

Summary

Issues:
1. Alleged clandestine clearance of goods without payment of duty under bogus invoices.
2. Validity of statements obtained by the department.
3. Source and veracity of recovered invoices.
4. Involvement and liability of various individuals in the case.
5. Imposition of penalties on the appellants and co-noticees.

Analysis:

Issue 1: Alleged Clandestine Clearance of Goods
The department conducted a search revealing activities of clandestine clearance by M/s. AKS Alloys Pvt. Ltd. using parallel invoices and numbering machines. The investigation showed significant evasion of duty and non-compliance with Central Excise procedures. The appellants denied intent to evade duty but admitted to the clearance of goods without payment. The Commissioner confirmed duty liability, interest, and penalties based on the findings.

Issue 2: Validity of Statements
The appellant argued that statements were obtained under threat and coercion, challenging the voluntary nature of the admissions made. However, the department contended that the appellants accepted the recovered documents and liabilities voluntarily, without evidence of coercion. The Commissioner found the admissions valid and upheld the penalties.

Issue 3: Source and Veracity of Invoices
The recovery of 217 invoices from an employee's residence, along with related equipment, indicated the existence of parallel invoices for clandestine clearances. Employees admitted involvement in preparing and using these invoices under instructions from higher management. The department's evidence, including logbooks and statements, supported the existence of clandestine operations.

Issue 4: Involvement and Liability of Individuals
Key individuals, including directors and employees, were implicated in the clandestine activities. Statements and evidence pointed to their roles in the scheme, leading to the imposition of penalties on the appellants and directors. The Commissioner's decision was based on corroborated admissions and evidence.

Issue 5: Imposition of Penalties
Penalties were imposed on M/s. AKS and the key director for their involvement in the clandestine operations. The department appealed for penalties on other co-noticees, but the adjudicating authority found no direct involvement or benefit from their actions. The decision not to impose penalties on these individuals was deemed fair and just, leading to the dismissal of the department's appeals.

In conclusion, the Tribunal upheld the Commissioner's order confirming duty liability, interest, and penalties on the appellants while dismissing the department's appeals regarding penalties on other co-noticees. The judgment highlighted the evidence of clandestine operations, admissions by involved parties, and the fair assessment of individual liabilities based on their roles in the illicit activities.