2018 (5) TMI 1300 - AT - Central Excise

Penalty u/r 209A of the Central Excise Rules - Clandestine removal - Cigarettes - demand of duty on on all duplicate bills and entries made - absence or proper evidences - Held that - during the period February, 1989 to March, 1992, all the franchisee units were under the strict physical control and supervision of the Excise Department who also maintained their own record. The impugned order or the show cause notice is silent on this aspect. The assessee-Appellants had repeatedly requested for production of diary XT-I which was never produced - the Department has not verified suppliers bills or the purchasers bills. No evidence was collected to adjudicate the clandestine removal of the goods which were transported and sold. The bank officers accepted that the bills were discounted without any physical verification of the goods - all the transactions of the bill discounting were duly recorded in the books of account of both the parties. The assessee-Appellants has committed a fraud with the Banks by raising the duplicate bills. For this financial irregularity, Department will be at liberty to initiate appropriate proceedings under the relevant law. But, in the instant case, the goods were not moved and there is no evidence pertaining to the clandestine removal of the goods - For clandestine removal, which is a serious charge, the strict evidence is required like supply of the raw-material, consumption of extra-electricity, transportation of the confiscated goods and sale of the finished goods. Unfortunately, no evidence has been collected by the Department pertaining to these aspects. When there is no clandestine removal, then no penalty can be imposed under Rule 209A of the Rules - penalty set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues Involved:
1. Imposition of duty and penalties on the assessee-Appellants.
2. Allegations of clandestine removal of cigarettes.
3. Validity of duplicate invoices and entries.
4. Imposition of penalty under Rule 209A of the Central Excise Rules.
5. Violation of principles of natural justice.

Detailed Analysis:

1. Imposition of Duty and Penalties:
The appeals were filed against the Order-in-Appeal dated 09.07.2010, which demanded duty and imposed penalties on various assessees. The Tribunal had previously remanded the matter for a fresh decision, leading to the current impugned order.

2. Allegations of Clandestine Removal of Cigarettes:
The Department conducted searches in 1993 and later in 1995, alleging unaccounted receipt of material and clandestine removal of cigarettes. However, the learned Chartered Accountant argued that no evidence was found to support these allegations. The Department's claims were based on duplicate invoices and entries, which were allegedly used to obtain bank loans.

3. Validity of Duplicate Invoices and Entries:
The assessee-Appellants contended that duplicate invoices were accommodation bills for financial arrangements, not for actual physical movement of goods. The Department, however, maintained that these duplicate bills indicated actual movement of goods without payment of excise duty. The Tribunal noted that the duplicate bills were generated for financial purposes and not for the physical movement of goods.

4. Imposition of Penalty under Rule 209A:
Rule 209A penalizes those dealing with excisable goods liable for confiscation. The Tribunal observed that the manufacture of cigarettes was under strict physical control of the Excise Department, and no evidence of clandestine removal was found. The Tribunal referenced the Supreme Court's ruling in Audh Sugar Mills, which held that physical control units could not be accused of clandestine removal without unimpeachable evidence. The Tribunal also cited various case laws supporting the non-imposition of penalties under Rule 209A in the absence of physical dealing with goods.

5. Violation of Principles of Natural Justice:
The Tribunal noted a violation of natural justice as no opportunity for cross-examination of departmental witnesses was provided. However, considering the time elapsed since the disputed period (1989-1993), the Tribunal decided against remanding the matter for further evidence collection.

Conclusion:
The Tribunal concluded that the Department failed to provide strict evidence of clandestine removal, such as unaccounted raw material, extra electricity consumption, or transportation of goods. Consequently, the penalties imposed under Rule 209A were set aside, and the appeals filed by the assessee-Appellants were allowed.

Result:
The impugned order was set aside, and the penalties imposed on the assessee-Appellants were dropped. The appeals were allowed, and the judgment was pronounced in the open court on 21.05.2018.