2004 (1) TMI 116 - AT - Central Excise

Duty demand and penalty - manufacture and removal of the goods without payment of duty - HELD THAT - It is well settled law that there has to be some evidence in the form of receipt of raw materials, shortage of raw materials, clandestine manufacture including use of electricity, excess or shortage of inputs found in the stock, flow back of funds, purchase of final products by parties alleging receipt and removal of goods and any such evidence which would show clandestine manufacture of goods. Mere slips wherein some entries have been made cannot be the basis including the statement recorded in terms of the ratio of the judgments cited by the counsel. In view of lack of evidence the appellant's plea is required to be accepted. The fact that they deposited Rs. 3 lakhs in their PLA a/c cannot be made to sustain the confirmation of demands. Appellants have explained that due to pressure from the department, an amount of Rs. 3 lakhs was deposited in the PLA to avoid penal proceedings. There is no investigation pertaining to the excess use of electricity for the purpose of manufacture of the item in question. The electricity required to be used would have shown excess consumption for manufacture of the final product. No such evidence has been brought forth. There is no evidence of clandestine purchase and sale of raw material and final product. There is no evidence pertaining to flow back of funds. Therefore, the entire case is based on chits does not have reliability and credibility. Thus, the impugned order is set aside and appeal allowed with consequential relief, if any, as per law.

Summary

Issues involved: Duty demand and penalty under Section 11AC confirmed based on slips and documents recovered during raid at Managing Director's premises.

Summary:
The Commissioner confirmed duty demand and imposed penalty under Section 11AC based on slips and documents recovered during a raid at the Managing Director's premises. The appellants, manufacturers of polyethylene films, contested the decision citing lack of evidence such as proof of purchase of raw materials, manufacture of final goods, and flow back of funds. The appellants argued that the slips alone cannot be the basis for confirming duty. They referenced various judgments to support their contention that the penalty is not imposable and that the evidence presented was insufficient. The Department defended the order, stating that the amount deposited in the PLA by the appellants was sufficient proof of the case. The Tribunal, after considering the submissions, concluded that mere slips and statements are not enough to confirm duty demand and clandestine removal. Lack of evidence regarding raw materials, manufacturing process, electricity usage, and flow back of funds led to the acceptance of the appellant's plea. The Tribunal found no reliable evidence of clandestine manufacture and removal of goods, setting aside the impugned order and allowing the appeal.

This judgment highlights the importance of substantial evidence in confirming duty demand and penalty under Section 11AC, emphasizing the need for proof of various elements such as raw material purchase, manufacturing process, and flow of funds to establish clandestine activities. The Tribunal's decision underscores the significance of thorough investigation and concrete evidence in such cases to ensure fair and just outcomes.