2019 (3) TMI 1415 - AT - Central Excise

Clandestine removal - Cavity Sheets - Upholstery Sheets - Department took the view that appellant had not manufactured US; that whatever CS manufactured by them had been partly accounted as CS and the rest as US - remand order - limited purpose of remand was to reconsider the demand of duty on CS found to have been removed as US by taking into account the observation of the Vice President and Third Member. Held that - In de novo proceedings adjudicating authority had requested the appellants for a number of seized documents which had been returned by the department to appellants. The adjudicating authority has stated both in paras 4.1 and 5.10 that only certain documents were made available to appellants. However in para 10 of the order a reference is also made to Memorandum dt. 14.12.2010 stating that the files listed from Sl.No.1 to 15 therein were hard to find as appellant s representatives who received such records were no longer in their employment. The adjudicating authority thereafter has proceeded to conduct de novo adjudication based on available records. When the adjudicating authority has repeatedly expressed his difficulty to decide the matter with the available evidence on record, we are unable to fathom how the lower authority has arrived at a very specific figures of production and clearance of CS and US for the period 1981-85 in Annexure-A to the order. No clear indication has been given by the adjudicating authority as to how these figures have been arrived at, notwithstanding his being constrained at not having all the evidence on hand . There is no hesitation in holding that the conclusions arrived at in the impugned order not only suffer from lack of evidence and investigation and further, is in total disconnect with CESTAT remand directions contained in the earlier Final Order No.302/2008 dt.31.3.2008 - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Alleged misdeclaration and evasion of duty by the appellants.
2. Determination of the correct assessable value of goods sold.
3. Compliance with CESTAT directions in the remand order.
4. Justification for invoking the extended time limit for demand.
5. Validity of the penalty and confiscation orders.

Issue-Wise Detailed Analysis:

1. Alleged Misdeclaration and Evasion of Duty by the Appellants:
The appellants were accused of selling Latex Foam Rubber goods through marketing companies where the directors held shares, without adopting the price at which these goods were sold by the marketing companies. The department alleged that the appellants misdeclared Cavity Sheets (CS) as Upholstery Sheets (US) to evade duty, as CS were of higher value compared to US. The adjudicating authority initially confirmed these allegations, stating that the appellants had systematically falsified production records and manipulated the clearance of CS as US, resulting in a loss of excise duty.

2. Determination of the Correct Assessable Value of Goods Sold:
The initial order held that the price at which marketing companies sold the goods should be the assessable value since the appellants and the marketing companies were "related persons." However, CESTAT Chennai set aside this finding, stating that the selling companies were not "related persons" under Section 4 (4)(c) of the Act, thus invalidating the demand based on this relationship. The case was remanded to reconsider the duty on CS removed as US, focusing on specific observations by the Vice President and Third Member.

3. Compliance with CESTAT Directions in the Remand Order:
The remand order required the adjudicating authority to reconsider the demand of duty on CS found to be removed as US, taking into account specific discrepancies and evidence. The authority was directed to provide detailed findings on non-production periods and the basis for arriving at production figures. However, the appellants argued that the authority failed to comply with these directions, merely reiterating previous findings without providing detailed reasoning or evidence. The adjudicating authority's reliance on earlier conclusions, despite CESTAT's directions, was found to be inadequate.

4. Justification for Invoking the Extended Time Limit for Demand:
The Commissioner in the de novo proceedings justified the invocation of the extended time limit, citing systematic falsification and manipulation by the appellants to suppress the actual value of the manufactured goods. However, the appellants contended that the authority did not provide sufficient evidence to support these conclusions, and the Tribunal noted the lack of clear evidence and investigation in the impugned order.

5. Validity of the Penalty and Confiscation Orders:
The initial adjudication included penalties and confiscation of plant and machinery, which were set aside by CESTAT. In the de novo proceedings, the adjudicating authority confirmed the differential duty and imposed an equal penalty under Rule 173Q of the Central Excise Rules, 1944, but dropped proceedings for confiscation and redemption fine. The Tribunal found that the conclusions in the impugned order were not supported by sufficient evidence and were largely a reiteration of the earlier adjudication, which had been set aside.

Conclusion:
The Tribunal concluded that the impugned order suffered from a lack of evidence and investigation and did not comply with the remand directions. The reliance on earlier findings, which had been set aside, and the failure to provide detailed reasoning and evidence led to the conclusion that the impugned order could not be sustained. Consequently, the appeal was allowed with consequential benefits as per law, setting aside the impugned order.

← Previous Next →