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2023 (11) TMI 415 - AT - Central ExciseImposition of penalty under Rule 209A of CER, 2002 - procurement of unaccounted raw material i.e. MS Scrap and using the same in the clandestine manufacture of MS Ingots - HELD THAT - There are no evidence as to the manufacture of MS Ingots using the alleged unaccounted raw material. There is no investigation or enquiry conducted as to whom M/s Jaibhavani has sold/supplied the MS Ingots clandestinely. The investigation carried out, statements recorded and documents relied upon are all in regard to the alleged procurement of raw materials from M/s Sujana. Even though search was conducted in the premises of M/s Shree Ganesh Steel Rolling Ltd, no documents are alleged to be recovered for clandestine clearance of M.S Ingots. It is clearly stated by M/s Anantha Subramanian that they receive the MS Ingots from M/s Jaibhavani under delivery challans - It is found that the entire Show Cause Notice and impugned order has only emphasized on the alleged unaccounted scrap cleared by M/s Sujana to M/s Jaibhavani. After appreciating the facts we find that the Department has miserably failed to establish clandestine manufacture and clearance of finished products by M/s Jaibhavani during the disputed period, which is the basis for demand of duty, interest and penalties. The adjudicated authority has imposed penalty of Rs.5,50,000/- on the appellant. From the facts and evidences placed, there are no hesitation to conclude that the penalty imposed on the appellant is not justified and requires to be set aside. The impugned order is modified to the extent of setting aside the penalty imposed on the appellant - Appeal allowed.
Issues Involved:
1. Alleged procurement of unaccounted raw material (MS Scrap) by M/s Jaibhavani from M/s Sujana. 2. Alleged clandestine manufacture and clearance of MS Ingots by M/s Jaibhavani. 3. Imposition of penalties on M/s Jaibhavani and its directors under Central Excise Rules, 1944. Summary: Issue 1: Alleged procurement of unaccounted raw material (MS Scrap) by M/s Jaibhavani from M/s Sujana. The investigation revealed that M/s Jaibhavani purchased 2405.200 MTs of imported shredded scrap without proper documents from M/s Sujana and did not account for them in their statutory records. The Show Cause Notice dated 28.06.1989 alleged that M/s Jaibhavani contravened the provisions of Central Excise Rules, 1944 by receiving unaccounted scrap and using it in the clandestine manufacture and clearance of MS Ingots, thereby suppressing facts with intent to evade payment of duty. The original authority confirmed the demand of excise duty amounting to Rs. 34,01,775 and imposed penalties on M/s Jaibhavani and its directors. Issue 2: Alleged clandestine manufacture and clearance of MS Ingots by M/s Jaibhavani. The appellant argued that there was no evidence of clandestine manufacture and clearance of MS Ingots. The case was based on the investigation against M/s MSTC, who had imported shredded scrap and supplied it to M/s Sujana. M/s Jaibhavani had procured some quantity of scrap from M/s Sujana and had obtained end use certificates for the quantity procured. The department failed to provide evidence of clandestine manufacture or clearance, such as excess consumption of electricity, transportation documents, or bank statements. The Tribunal found that the entire case was based on the alleged unaccounted scrap cleared by M/s Sujana to M/s Jaibhavani, with no evidence of clandestine clearance of finished products. Issue 3: Imposition of penalties on M/s Jaibhavani and its directors under Central Excise Rules, 1944. The Tribunal noted that the department failed to establish clandestine manufacture and clearance of finished products by M/s Jaibhavani. The penalty of Rs. 5,50,000/- imposed on Shri Pramod Saraf, Chief Executive of M/s Jaibhavani, was not justified and was set aside. The appeal filed by Shri Pramod Saraf was allowed with consequential reliefs, if any. Conclusion: The Tribunal found that the department failed to establish clandestine manufacture and clearance of finished products by M/s Jaibhavani. The penalty imposed on Shri Pramod Saraf was set aside, and the appeal was allowed with consequential reliefs. The impugned order was modified to the extent of setting aside the penalty imposed on the appellant.
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