2018 (7) TMI 318 - AT - Central Excise

Clandestine removal - irregular maintenance of stock record - Contention of the department is that the appellant did not have the capacity to produce goods which allegedly were found in excess - Held that - The appellant had stated before the adjudicating authority that the alleged excess production of 827MT of MS Ingots was nothing but the accumulated production of preceding months which were not accounted for properly. However, the appellant has failed to produce any evidence to support their statement. It had been observed by the adjudicating authority that the bank transactions, as indicated by the bank statement, had recorded the purchase of raw material and sale of finished goods, however, the transactions could not be verified against the relevant statutory register due to the negligence on the part of the appellant in not maintaining proper records, which contravenes the provisions under Rule 10 of the Central Excise Rules, 2002 - demand upheld. Penalty u/r 26 - Held that - It has been stated that he had no knowledge of the alleged irregularity. In any event, the appellant No. 2 had deposited the duty suo moto during the investigation - the Revenue has failed to establish, beyond reasonable doubt, that the appellant No. 2 has contravened any of the provisions under Rule 26 of the Rules - penalty not justified. Appeal allowed in part.

Issues:
1. Alleged clandestine removal of goods to evade duty payment.
2. Capacity of the appellant to produce goods.
3. Irregularities in record-keeping by the appellant.
4. Burden of proof in cases of clandestine removal.
5. Imposition of penalty on the appellant and the Managing Director.

Analysis:

1. The case involved an appeal against an Order-in-Appeal passed by the Commissioner (Appeals) regarding the alleged clandestine removal of goods by the appellant to evade payment of Central Excise duty. The Directorate General of Central Excise Intelligence found irregularities during a visit to the factory premises and issued a show cause notice proposing a demand of duty along with interest and penalty. The Managing Director's statement was recorded, confirming the demand and imposing penalties. The Commissioner (Appeals) upheld the order, leading to the appeal before the Tribunal.

2. The appellant argued that their production capacity was sufficient to account for the alleged excess production of goods. They cited certificates and previous judgments to support their claim. However, the Tribunal noted that the irregularities in record-keeping were not disputed by the appellant. The appellant failed to provide evidence supporting their claims, and the negligence in maintaining proper records contravened Central Excise Rules.

3. The Tribunal referred to the judgment in the case of Shalu Dyeing & Printing Mills to emphasize the burden of proof in cases of clandestine removal. It highlighted the importance of preponderance of probabilities rather than proof beyond reasonable doubt. The Tribunal found the appellant's arguments unpersuasive, upholding the demand of duty, interest, and penalty against the appellant company. The company was directed to pay the balance amount and applicable interest.

4. Regarding the penalty imposed on the Managing Director (Appellant No. 2), the Tribunal noted that the Revenue failed to establish his contravention of the provisions under Rule 26 of the Central Excise Rules. As the burden of proof was not met beyond reasonable doubt, the imposition of the penalty on the Managing Director was deemed unjustified. The appeals were disposed of accordingly, with the Tribunal's decision pronounced in open court on 22.05.2018.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the case and the Tribunal's decision on each aspect.

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