2003 (8) TMI 82 - AT - Central Excise

Enhancement of duty demand and penalties in remand proceedings - clandestinely manufacturing and clearing copper/brass sheets without payment of duty - Violation of the principle of natural justice - HELD THAT - From the record, it is clear that the evidence on record cumulatively support the finding of clandestine production and clearance of sheets. That bring us to the question as to what quantity was involved. The Commissioner has taken average production of 900 kgs. per day at 24 working days per month. The appellants have pointed out that this calculation has been relied heavily upon the statements of both Chunchun and Subhash Yadav, the two employees who have not been offered for cross-examination. It has also been submitted that such a high level of production does not take into account market fluctuations in demand, repair and other problems with machinery, etc. Also duty demand should be computed after allowing exemption as available to small-scale unit and treating the price of the goods as cum-duty value. Further, price for each year is required to be determined after due adjustment from the sale prices noted. Revised duty so worked out amounts to Rs. 26,23,179/- for the entire Show Cause Notice period. In view of our findings on the charge of clandestine production and clearance, we are of the opinion that the appellant is liable to pay this revised duty demand of Rs. 26,23,179/-. The case involves serious and deliberate violation of law and falsification of accounts which led to evasion of central excise duty. Clearly, fraud has been committed on the Revenue and justified invoking of the extended period permitted under provisions to Section 11A of the Central Excise Act for demanding the duty. Since the duty evasion is the result of fraud, there could be no doubt that penalty is attracted. Under the impugned order, penalty of about Rs. 1.28 crore has been imposed on M/s. Vallabh Alloys. The penalty imposed in the first adjudication was only Rs. 10 lakhs; we accept the appellant's submission that in the remand proceedings duty and penalty should not have been enhanced despite this Tribunal's order of remand in Revenue's appeal and reduce the penalty to Rs. 10 lakhs. However, we make it clear that the appellant shall be liable to pay interest on the duty amount arising with effect from 28-9-96, the day on which Section 11AB came into effect. In the present case the persons concerned are involved as manufacturer of the goods. We feel that separate penalties on these individuals are not warranted. Accordingly, these penalties are vacated and appeals allowed. The four appeals in question are ordered as above.

Summary

Issues Involved:
1. Enhancement of duty demand and penalties in remand proceedings.
2. Violation of the principle of natural justice.
3. Merits of the case regarding clandestine manufacture and clearance.
4. Calculation of duty demand and penalties.
5. Separate penalties on individual appellants.

Summary:

1. Enhancement of Duty Demand and Penalties in Remand Proceedings:
The appellants contended that the duty demand and penalties should not have been enhanced in remand proceedings. The Tribunal accepted this submission, stating that the enhancement was not justified despite the remand order.

2. Violation of the Principle of Natural Justice:
The appellants argued that the proceedings violated the principle of natural justice as two key witnesses, Shri Chunchun and Shri Subhash Yadav, were not offered for cross-examination. The Tribunal found merit in this argument and discarded the statements of these witnesses due to their unavailability for cross-examination and other defects in their statements.

3. Merits of the Case Regarding Clandestine Manufacture and Clearance:
The Tribunal evaluated the evidence and concluded that the finding of clandestine manufacture and clearance of brass/copper sheets was well-founded. The recovery of unaccounted goods worth about Rs. 19 lakhs, the employment of 34 workers, and the installed machinery supported the charge. The Tribunal rejected the appellant's explanations regarding job work, electricity consumption, and the reliability of their records.

4. Calculation of Duty Demand and Penalties:
The Tribunal noted that the Commissioner had calculated the production based on inadmissible statements and exaggerated quantities. It was determined that the revised duty demand should be Rs. 26,23,179/- after considering the small-scale exemption and treating the price as cum-duty value. The penalty on M/s. Vallabh Alloys was reduced to Rs. 10 lakhs, aligning with the penalty imposed in the first adjudication. However, the appellant was liable to pay interest on the duty amount from 28-9-96, the effective date of Section 11AB.

5. Separate Penalties on Individual Appellants:
Penalties imposed on Shri B.K. Jain, Shri Padam Jain, and Shri Sandeep Jain u/r 209A of the Central Excise Rules were vacated. The Tribunal found that separate penalties on these individuals were not warranted as they were involved as manufacturers, not in possession, transport, buying, or selling of offending goods.

Conclusion:
The appeals were disposed of with the revised duty demand and reduced penalties, while separate penalties on individual appellants were vacated.