2018 (6) TMI 633 - AT - Central Excise

Clandestine manufacture and removal - raw tobacco - shortage of goods - It appeared to Revenue that there were some mismatches in the invoices issued and the GR s found from the premises of the appellants as well as the GR s found at the premises of the buyers. Whatever GR s the Revenue could tally during investigation and enquiry with the invoices were accepted and rest of the GR s appeared to be by way of clandestine removal - Held that - Demand on account of differences of weight is bad as the appellant and its partners have given cogent explanation during investigation regarding difference of material weight in any consignment being on account of dispatch of advertisement and publicity material at times and also the gifts to be given under the Sales Promotion Scheme - the demand is only presumptive and is set aside. Demand of ₹ 6,00,640/- based on the Page No.40 in the diary/notebook seized from the car of Shri Chandra Prakash Agarwal - Held that - The said investigation done by Revenue was not adequate, as no enquiry have been made regarding the said entries by the author of the said entry Shri Chandra Prakash Agarwal - Revenue have not made any further investigation and enquiry from the author of the entry Shri Chandra Prakash Agarwal - this demand to be simply presumptive in nature without any cogent evidence brought on record - demand set aside. Demand of ₹ 2,39,574/- on the basis of loose sheet recovered from the factory premises - Held that - The said loose paper/sheet does not lead to any evidence of procuring any dutiable inputs and/or clearance of any taxable outputs, save and except presumptions of the Revenue - Department has failed to adduce any corroborative evidence in support of the charge of clandestine removal - demand set aside. Penalty u/s 11AC and Rule 52-A of the Central Excise Rules, 1944 - Held that - penalties are not imposable and are set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Alleged clandestine removal of goods.
2. Difference in weight between GR and invoice.
3. Demand based on entries in a seized diary.
4. Demand based on a loose paper.
5. Imposition of penalties under Section 11AC and Rule 52-A of Central Excise Rules, 1944.

Detailed Analysis:

1. Alleged Clandestine Removal of Goods:
The case involves J.M. Agarwal Tobacco Company and J.M. Agarwal Tobacco Company Pvt. Ltd., both manufacturers of branded chewing tobacco. A search on 08/06/2001 led to the discovery of discrepancies in stock and records. Follow-up searches revealed mismatches in invoices and GRs, leading to allegations of clandestine removal of goods without paying duty. The Revenue issued show cause notices (SCNs) on 09/01/2003.

2. Difference in Weight Between GR and Invoice:
The demand of ?3,96,460/- was based on differences in weight between the GR and the invoice. The appellant explained that the nominal differences (1% or 2%) were due to the weight of packing material, advertisement, and promotional items. The Tribunal accepted this explanation, noting that the number of packages always tallied with the invoices. Thus, the demand was set aside as presumptive.

3. Demand Based on Entries in a Seized Diary:
A diary seized from the car of Shri Chandra Prakash Agarwal contained entries under the title "Milk," which the Revenue interpreted as code for clandestine sales amounting to ?18.01 lakhs. Shri Laxmi Narain Agarwal initially admitted this but later retracted, claiming coercion. The Tribunal found the investigation inadequate as the author of the entries was not questioned. Consequently, the demand of ?6,00,640/- was set aside as presumptive and unsubstantiated.

4. Demand Based on a Loose Paper:
A loose paper with rough calculations was seized, leading to a demand of ?2,39,574/-. The appellant argued that these were rough calculations not related to the sale of tobacco. The Tribunal found no corroborative evidence and noted that the entries lacked dates and specific details. The demand was deemed presumptive and unsubstantiated, and thus set aside.

5. Imposition of Penalties under Section 11AC and Rule 52-A of Central Excise Rules, 1944:
The Commissioner had confirmed a total demand of ?17,53,634/- but the appellant contested only ?12,36,674/-. The Tribunal found that the contested demands were presumptive and lacked substantial evidence. Therefore, the penalties under Section 11AC and Rule 52-A were set aside. The uncontested demand of ?5,16,960/- was confirmed, but no penalties were imposed as it was surrendered for lack of reconciliation.

Conclusion:
The Tribunal allowed the appeals, setting aside the contested demands and penalties. The only confirmed demand was ?5,16,960/-, which the appellant had not contested. The decision emphasized the need for substantial evidence and proper investigation before drawing adverse inferences. The appellants were entitled to consequential benefits as per the law.