2017 (12) TMI 210 - AT - Central Excise

Clandestine removal - demand on the ground of speed of the machines - M/s M.R. Tobacco Pvt. Ltd. has declared the speed of the machines as 60-70 pouches per machine per minute in compliance with the Board s Circular - Held that - allegation of the Department is that the speed of the machines was too high perhaps in the range of 110 pouches per minute per machine, but the fact remains that the speed was never measured by an expert. This was merely a guess work. No expert opinion was sought with regard to the speed of machines. So, in the absence of any technical expert s opinion, this allegation was dismissed in the impugned order. Shortage of raw material - Held that - The Department failed to point out any basis that the electricity consumed in the factory was not in consonance with the production. There were five machines in the factory, but the rawmaterial was calculated on the basis of only two machines - the Department has not verified, in the course of investigation, the production capacity of the Company. The Department could not find any irregularity in the electricity consumption nor evidence was collected with regard to the alleged clandestine clearance of the finished goods for the period prior to the investigation and after search of the Company upto 30.06.2008. Penalty on Shri Chander Kumar Gupta - Held that - Shri Chander Kumar Gupta (assessee-Appellant) ceased to be a Director w.e.f. 15.07.2009 and has nothing to do with the Company. The reason for his resignation from the Company was his illness. The Hon ble High Court has also reduced the penalty on the ground of his illness - The penalty has already been paid as per the direction of the Hon ble High Court. When it is so, then we find no reason to interfere with the impugned order whereby the penalty imposed has already been paid. Penalty on Montage Enterprises Pvt. Ltd. - Held that - no penalty can be imposed on corporate entity under Rule 26 of the Central Excise Rules, 2002 - penalty set aside. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Service of notice on the main party.
2. Imposition of penalty on individuals and corporate entities.
3. Allegations of clandestine removal of raw materials and irregularities in production.

Analysis:
1. The judgment involves appeals filed by the Department against the Order-in-Original passed by the Commissioner of Central Excise. The main party, M/s M.R. Tobacco Pvt. Ltd., did not respond to notices sent by the Registry. The Department attempted to serve the notice through various channels, including Departmental channels and postal services, with evidence of delivery and non-response. The Tribunal deemed the notice of service complete based on these attempts.

2. The legal counsels representing the respondents presented arguments regarding the imposition of penalties. One counsel highlighted that penalties were duly paid by the individuals involved, and hence, the Department's appeal was unnecessary. Another counsel cited a Supreme Court ruling stating that penalties cannot be imposed on corporate entities under Rule 26 of the Central Excise Rules. The Tribunal considered these arguments and upheld the impugned order, dismissing the Department's appeals in this regard.

3. The case involved allegations of clandestine removal of raw materials and irregularities in production processes at M/s M.R. Tobacco Pvt. Ltd. The Department's claims were based on statements from employees, but crucial aspects such as expert opinions on machine speeds and thorough investigations into raw material suppliers and finished goods buyers were lacking. The Tribunal found no merit in the Department's contentions, as critical aspects of the investigation were not adequately addressed. Consequently, the impugned order was upheld, and the Department's appeals were dismissed.

In conclusion, the judgment addresses issues related to notice service, penalty imposition on individuals and corporate entities, and allegations of clandestine activities in production processes. The Tribunal carefully analyzed the arguments presented by both sides, emphasizing the importance of thorough investigations and expert opinions in such cases. Ultimately, the appeals filed by the Department were dismissed, and the impugned order was upheld based on the lack of substantial evidence supporting the Department's claims.