2000 (5) TMI 43 - HC - Central Excise

Summary

Issues Involved:
1. Clandestine clearance of excisable goods.
2. Excess stock not accounted for in books.
3. Demand of central excise duty.
4. Imposition of penalties.
5. Rejection of rectification of mistake applications.
6. Alleged procedural lapses and assumptions by the department.
7. Alleged non-consideration of grounds by the Tribunal.
8. Bar of limitation on demand.

Detailed Analysis:

Clandestine Clearance of Excisable Goods:
The petitioners, a partnership concern manufacturing menthol and DMO, were found by Central Excise Officers on 12-7-1995 to be clandestinely clearing excisable goods without accounting for them in their books. The department issued notices proposing a demand of Rs. 53,55,862.15 as central excise duty on goods valued at Rs. 2,71,54,179.00 cleared without paying excise duty.

Excess Stock Not Accounted for in Books:
During the inspection, an excess stock of finished goods was found, which was not accounted for in the petitioners' books. The Adjudicating authority ordered the confiscation of goods worth Rs. 99,39,334.00 seized from the petitioners.

Demand of Central Excise Duty:
The department proposed an additional demand of Rs. 33,22,722.00 based on the assumption of menthol produced and cleared during June and July 1995. The Adjudicating authority confirmed the demand of Rs. 53,55,862.00.

Imposition of Penalties:
Penalties were imposed on the petitioners amounting to Rs. 55,00,000/-. Additional penalties of Rs. 10 lacs each were imposed on individual partners and another person under section 209A of the Act. The Tribunal upheld these penalties but reduced the penalty on one individual from Rs. 10 lacs to Rs. 1 lac.

Rejection of Rectification of Mistake Applications:
The Tribunal rejected the rectification of mistake applications filed by the petitioners. It was held that the mistakes alleged required meticulous examination and reappraisal of evidence, which do not qualify as mistakes apparent on the record under Section 35C(2) of the Central Excise Act. The Tribunal relied on the Supreme Court decision in Dwarka Das v. State of Madhya Pradesh and Another, which clarified that only clerical or typographical errors could be corrected in a ROM application.

Alleged Procedural Lapses and Assumptions by the Department:
The petitioners argued that the demands were based on surmises and presumptions, and that the goods were not cleared clandestinely. They contended that the G.Rs found were not fake and that the officers did not make any enquiries from the consignors and consignees. They also argued that the assumptions regarding the production of menthol and DMO were not based on scientific methods.

Alleged Non-Consideration of Grounds by the Tribunal:
The petitioners contended that the Tribunal did not address all the questions raised in their appeal, including the issue of limitation and the method of stock verification. They argued that the Tribunal failed to consider that the excess stock included goods belonging to trading units and that the principles of natural justice were violated as they were not provided with copies of all witness statements.

Bar of Limitation on Demand:
The petitioners argued that the entire demand was time-barred, a specific plea which was not considered by the Tribunal.

Conclusion:
The High Court found that the Tribunal did not consider all the grounds raised in the memo of appeal, including the question of limitation and the method of stock verification. The Court quashed the Tribunal's order dated 14-5-1999 and directed the Tribunal to decide the appeal afresh, addressing each ground taken in the memo of appeal. The petition was partly allowed, and the Tribunal was instructed to expedite the decision of the appeal. No order as to costs was made.