2018 (12) TMI 1029 - AT - Central Excise

CENVAT Credit - penalty - Denial on the ground that the entire raw material has not been used in the final product as some part thereof being lost - Held that - Department has conceded that had the washing process been undertaken by the appellant in its own factory, the entire credit would be available. Accordingly, denial of credit on raw coal is unjustifiable even in view of Rule 14 of CCR, 2004. Clandestine manufacture and removal - unaccounted raw materials - finished goods/ MS billets - penalty - Held that - As is apparent from panchnama the estimation is based on presumption. There is no other evidence except the statements and the acknowledgement therein though without any retraction to prove the alleged shortage. Above all, Mr. Gopal Bordya is the third person as far as the Company as well as its Directors is concerned. The allegations of clandestine removal are serious. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - Once this is the situation, irrespective that the Central Excise duty as demanded stands paid, but the fact remains is that there is no evidence for alleged shortage. Mere statement as relied upon is highly sufficient. Also that the same has been paid well before the issuance of SCN. Resultantly, proviso to Section 11AC of the Act is applicable vide which the appellant was liable to pay the penalty only to the extend to 25% of the Central Excise duty involved. Penalty as imposed upon The Directors - Held that - Though the Directors have been alleged to have not disclosed the facts and alleged short receipt of input to the Department which came to the notice of Department only at the time of visit but in view of above discussions, the cenvat credit as was denied by the Department on the input of the appellant, has been allowed, no mensrea of tax evasion can be attributed to the appellant Directors - keeping in view that the alleged short payment of Central Excise duty since has been paid by them and has not been demanded back, there is no infirmity in imposition of penalty upon the Directors - penalty upheld. Appeal allowed in part.

Summary

Issues:
1. Central Excise duty liability on alleged unaccounted raw materials and clandestine manufacturing.
2. Denial of cenvat credit on raw materials and imposition of penalties.
3. Allegations of clandestine removal and penalties imposed on the Company and Directors.

Central Excise Duty Liability:
The judgment pertains to three Appeals originating from a common Order-in-Appeals concerning a Company and its Directors. The Company was served a Show Cause Notice based on intelligence suggesting procurement of unaccounted raw materials and clandestine manufacturing. The Deputy Commissioner confirmed the proposed recoveries along with penalties. The Commissioner(Appeals) upheld the decision, leading to the Appeals before the Tribunal. The appellant Company conceded to the Central Excise duty but contested the denial of cenvat credit and penalties. The Tribunal considered the evidence and arguments presented by both parties.

Denial of Cenvat Credit and Penalties:
The appellant argued that the denial of cenvat credit on the short received quantity of coal was unjustified, citing procedural lapses and lack of evidence supporting clandestine removal. They relied on legal precedents to support their case. The Department, however, defended the denial of credit and imposition of penalties, emphasizing the seriousness of the allegations and the appellant's admission of duty liability. The Commissioner(Appeals) relied on Supreme Court decisions to support the confirmation of the original Order.

Allegations of Clandestine Removal and Penalties:
The Tribunal analyzed the evidence and legal principles regarding clandestine removal and penalties. It noted the lack of concrete evidence supporting the allegations, highlighting the reliance on statements without proper verification. Legal precedents were cited to emphasize the requirement of substantial evidence for proving clandestine activities. The Tribunal considered the liability of the Directors in light of the appellant's payment of duty and the absence of mens rea for tax evasion. Ultimately, the Tribunal partly allowed the Appeals, setting aside the denial of cenvat credit and reducing penalties.

This detailed judgment addresses the issues of Central Excise duty liability, denial of cenvat credit, and penalties in a thorough manner, considering evidence, legal arguments, and precedents to arrive at a reasoned decision.