2019 (6) TMI 1317 - AT - Central Excise

Clandestine removal - shortage of finished goods and excess in the stock of raw material - sale of flats as such - the contentions of appellant have not been considered properly - principles of natural justice - HELD THAT - Since the appellant company is willing to pay the Central Excise duty demandable from them, their contentions about violation of principles of natural justice etc. are not being considered - One of the main contention of the appellant company is that the suppliers of goods had collected Central Excise duty from it while supplying the goods without invoices, and some of the suppliers had already deposited the said duty with the Department and considerable amount of duty has been confirmed against other suppliers. The appellant company has submitted that since the duty has been deposited by / demanded from its suppliers, their duty liability should be reduced by the said amount as they had already paid duty amount to its suppliers - It is observed that though the appellant company has taken this stand since the beginning, even during the course of investigation, the Revenue has not controverted these facts. The documents resumed by the Revenue and relied upon in show cause notice, also supports this fact - Thus where the amount of duty has been deposited by the suppliers, the duty liability of the appellant company is ordered to be reduced by the said amount. Sale of M.S. Flats as such - HELD THAT - The records resumed by the officers and relied upon in show cause notice and the impugned order clearly show purchase of M.S. Flats by the appellant company. This is evident from the profit loss account of the appellant company scanned in the show cause notice itself. Once the Revenue has placed reliance on resumed documents and data retrieved from laptop, it cannot claim that M.S. Flats were not purchased and sold as such. The documents have to be believed in toto and not in part only. Further, the Revenue has not brought any material to show that the purchased M.S. flat were used in or in relation to manufacture of any other product - thus duty of excise is not demandable from the appellant company, on the quantity of M.S. flats purchased and sold as such - Similarly, the duty of excise cannot be demanded on the quantity of Miss Rolls sold as such by the appellant company. Penalty - HELD THAT - Penalty on the appellant company is imposable under Section 11AC of the Central Excise Act, as the finished goods have been removed without payment of duty. However, we agree with the learned Advocate that separate penalties are not imposable on Directors and former Director once the penalty under Section 11AC has been imposed on the company - Further, penalty is not imposable on Ankit Keriwal, as he was a mere employee bound to follow the directions of the company management. Moreover, there is no material to show that Ankit Keriwal has gained anything personally. We, therefore, set aside the penalties imposed on all directors/ former Director and Manager (Ankit Keriwal). The learned Commissioner is directed to compute the duty amount payable by the appellant company as modified in this order, and communicate the same to the appellant company - appeal allowed by way of remand.

Issues Involved:
1. Issuance of 'No Objection Certificate' for selling industrial plot.
2. Demand of Central Excise duty based on resumed documents and tally data.
3. Violation of principles of natural justice.
4. Adjustment of duty liability based on duty paid by suppliers.
5. Demand of duty on trading activities.
6. Imposition of penalties on the company and its directors/managers.

Issue-wise Detailed Analysis:

1. Issuance of 'No Objection Certificate' for Selling Industrial Plot:
The appellant company requested a direction to the lower authorities to issue a 'No Objection Certificate' to sell its industrial plot to pay the Central Excise duty. The request was initially denied by the adjudicating authority. The Tribunal allowed the appellant to dispose of the land and building, plant, and machinery, directing that the sale proceeds first be used to deposit the duty liability and applicable penalty.

2. Demand of Central Excise Duty Based on Resumed Documents and Tally Data:
The duty demand of ?3,00,18,268/- was based on the difference between the sale value shown in the Central Excise Records and the tally data recovered from the appellant's computer. The Tribunal noted that the appellant was willing to pay the duty demandable from them but contended that the duty already paid by their suppliers should be adjusted against their liability.

3. Violation of Principles of Natural Justice:
The appellant argued that the impugned order violated the principles of natural justice as cross-examination of witnesses was not allowed, and the enquiry from all suppliers and buyers was not conducted. However, since the appellant was willing to pay the duty, the Tribunal did not consider these contentions.

4. Adjustment of Duty Liability Based on Duty Paid by Suppliers:
The appellant contended that the duty liability should be reduced by the amount already deposited by their suppliers. The Tribunal agreed, stating that the duty liability of the appellant company should be reduced by the amount of duty already deposited by the suppliers. However, if the duty had only been confirmed and not deposited by the suppliers, such amounts could not be deducted at this stage. The Tribunal allowed for future refunds if the suppliers deposited the duty.

5. Demand of Duty on Trading Activities:
The appellant argued that they purchased M.S. Flats and Miss Rolls from the market and sold them without any manufacturing activity, and thus no duty should be demanded on these transactions. The Tribunal agreed, noting that the resumed records clearly showed the purchase and sale of M.S. Flats and Miss Rolls as such, and there was no evidence that these were used in manufacturing other products. Consequently, the duty on these items was not demandable from the appellant company.

6. Imposition of Penalties on the Company and Its Directors/Managers:
The Tribunal found that a penalty on the appellant company was imposable under Section 11AC of the Central Excise Act for removing finished goods without payment of duty. However, it agreed that separate penalties on directors and managers were not warranted once the company was penalized. The penalties on all directors, the former director, and the manager were set aside. The Tribunal also noted that the manager was merely an employee following company directions and had gained nothing personally.

Conclusion:
The Tribunal allowed the appeals by way of remand, directing the Commissioner to compute the duty amount payable by the appellant company as modified in the order and to communicate the same. The penalty under Section 11AC would be reduced equivalent to the duty amount now payable, with an option to pay duty, interest, and reduced penalty within one month. The appellant company was also allowed to sell its assets to meet the duty liability. All appeals and the miscellaneous application were disposed of accordingly.

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