2001 (11) TMI 89 - HC - Central Excise

Summary

Issues Involved:
1. Legitimacy of the seized goods and the basis for the demand.
2. Verification of consignors and consignees.
3. Validity of the demand based on the period of clearance.
4. Consideration of evidence and material by the Tribunal.
5. Application of the limitation period u/s 11A of the Central Excise Act.

Summary:

1. Legitimacy of the Seized Goods and Basis for the Demand:
The petitioners, a partnership concern engaged in manufacturing menthol and DMO, were accused of clandestinely clearing excisable goods and having excess stock unaccounted in their books. The Central Excise Department issued notices demanding Rs. 53,55,862.15 as central excise duty on goods valued at Rs. 2,71,54,179.00 and 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, imposed penalties, and ordered confiscation of goods worth Rs. 99,39,334.00.

2. Verification of Consignors and Consignees:
The petitioners contended that the seized G. Rs. were presumed fake by the department without verification from consignors and consignees. Despite repeated requests, no inquiries were made. The petitioners provided affidavits and bank drafts to prove the genuineness of the G. Rs., which the Tribunal did not properly consider. The court noted that the department failed to verify the consignors and consignees, and the evidence provided by the petitioners was substantial and verifiable.

3. Validity of the Demand Based on the Period of Clearance:
The petitioners argued that the seized G. Rs. pertained to the period 14-10-1993 to 14-6-1995, and any goods cleared after 14-6-1995 could not be dispatched through the said G. Rs. The demand of Rs. 33,22,722/- was included in the total duty of Rs. 53,55,862/- based on the seized G. Rs. The court found that the department's allegations lacked authenticity without investigations from the consignors and consignees.

4. Consideration of Evidence and Material by the Tribunal:
The Tribunal's order was criticized for not giving proper consideration to the material furnished by the petitioners. The court observed that the department's case was based on surmises and presumptions without substantial evidence. The Tribunal failed to corroborate its allegations with inquiries from the Bombay-based firms and did not record statements from workers operating the distillation plant.

5. Application of the Limitation Period u/s 11A of the Central Excise Act:
The petitioners challenged the invocation of the extended period of limitation u/s 11A of the Central Excise Act. The Tribunal upheld the extended period citing suppression and mis-statement by the petitioners. However, the court found that the distillation plant was operated by a separate trading unit, and there was no suppression by the petitioners. The RT 12 returns were finalized after June 1995, indicating no suppression. The Tribunal's finding on limitation was not sustained.

Conclusion:
The court concluded that the department failed to make out a case against the petitioners. The writ petition was allowed, and the impugned order by the Tribunal was set aside. The petitioners were entitled to a refund of the money deposited u/s 35F of the Central Excise Act. No order as to costs.