2022 (9) TMI 1279 - AT - Central Excise

Clandestine removal - Ingots - demands of duty made on account of alleged production based on the number of heats and alleged clandestine removal based on parallel invoices - demand based on the private production records of the appellant - demand based on the 12 parallel invoices recovered from the appellant s office. Demand based on the number of heats of manufacture every day and the average quantity of MS Ingots produced per heat - HELD THAT - According to the appellant itself the cross-section of the ingots is 3.5 inches X 4.5 inches. If the total volume of the ingots per inch is converted into cubic centimeters and the weight of 1.96 kg. per inch is considered, the density of the MS Steel ingots produced by the appellant is consistently around 7.59 gms. per cubic centimeter which is consistent with the density of the mild steel. Therefore, there are no inconsistency in the production records for the three days. The data is reliable and robust. How much quantity of ingots were produced during the previous three months? - HELD THAT - There is no evidence that it had been modified during the three month period. Therefore, the quantity of MS Ingots produced in one batch/heat will be more or less be similar to the quantity produced in another batch. At any rate, there cannot be a very large variation - the average quantity of 8.447 tons of ingots per batch reckoned by the Adjudicating Authority for confirming the demand is correct and calls for no interference. The submission of the learned Counsel that only 6 or 6.5 M.T. can be produced per heat is inconsistent with the data which is undisputed and is available on record. The duty of central excise is leviable for the manufacture of the goods although it is payable on removal or at the end of the month. If there is no manufacture there cannot be any demand of duty. To the extent the manufacture was shown by the appellant in its excise returns, duty has already been paid. It is this excess manufacture which has not been reflected in the excise returns which is in dispute. This manufacture has not been determined by the Revenue out of thin air but has been worked out on the basis of the records of the appellant themselves - Merely, because the buyers of clandestinely removed goods and the transporters could not be found the manufacture of these goods cannot be denied when the appellant s own records indicate the manufacture. There is no evidence of any variation of the capacity of the furnace during that period. There are sufficient reason to trust the private records maintained by the appellant itself and hold that the demand on this count is reasonable and needs to be upheld. Demand on the basis of 12 parallel invoices - HELD THAT - There cannot be two invoices with the same number with different dates and different quantities and with paying duty on the one and not paying duty on another. Maintaining a parallel sets of invoices is a well known modus operandi for clandestine removal of goods. If the parallel invoices are not detected, they can be destroyed by the assessee after clandestinely removing goods against them without paying duty or even indicating duty and then and recovering the duty from the customers and not paying the duty to the Revenue. However, Revenue can only book a case against the appellant to the extent it finds evidence. In this case, only 12 invoices were detected and duty was demanded only on such invoices. It is undisputed that there were another set of invoices of the same number, but with different details. The impugned order is correct in demanding duty to the extent it did. Consequently, the demand of interest and penalty under section 11AC also need to be upheld - It is undisputed that Shri Singh was a Director. He was directly responsible for the operations of the assessee. Accordingly, the penalty of Rs. 50,000/- imposed upon him is fair and just and no interference is required. Appeal dismissed.

Issues Involved:
1. Demand based on the number of heats of manufacture every day and the average quantity of MS Ingots produced per heat.
2. Demand based on 12 parallel invoices.
3. Imposition of personal penalty on the Director.

Issue-Wise Detailed Analysis:

1. Demand based on the number of heats of manufacture every day and the average quantity of MS Ingots produced per heat:

The demand of Rs. 56,84,298/- was based on a notebook seized from the appellant's factory, indicating the number of heats produced each day. The average production was reckoned as 8.447 M.T. of MS Ingots per heat based on production reports during October 2012. The appellant contested this demand, arguing that the notebook did not mention the quantity produced in each heat, and the demand based on assumed average production was not sustainable as there was no clinching evidence to establish any clandestine removal. The appellant also argued that no buyers or transporters were identified, no raw material suppliers were questioned, and no large cash transactions were detected.

The Tribunal found that the production reports for three days (14.10.2012, 16.10.2012, and 17.10.2012) were consistent and robust, indicating that each heat produced between 8.2 to 8.6 M.T. The Tribunal held that the average quantity of 8.447 tons of ingots per batch reckoned by the Adjudicating Authority was correct and called for no interference. The Tribunal also noted that the appellant's own records indicated the manufacture, and the demand on this count was reasonable and needed to be upheld.

2. Demand based on 12 parallel invoices:

The demand of Rs. 6,12,193/- was based on 12 parallel sets of invoices, where each invoice had a corresponding invoice with the same number but different details. The appellant argued that they were extra copies of invoices and there was no bar on maintaining extra copies under central excise rules. However, the Tribunal found that the parallel invoices indicated clearances of different quantities and different dates, with duty being paid on one and not on the other. The Tribunal upheld the demand on this count, noting that maintaining parallel sets of invoices was a well-known modus operandi for clandestine removal of goods.

3. Imposition of personal penalty on the Director:

A penalty of Rs. 50,000/- was imposed on the Director under Rule 26 of the Central Excise Rules. The Tribunal noted that the Director was directly responsible for the operations of the assessee and upheld the penalty as fair and just.

Conclusion:

The Tribunal upheld the impugned order, confirming the demands based on the private production records and the parallel invoices, along with the imposition of penalties. Both appeals were rejected.

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