2004 (7) TMI 134 - AT - Central Excise

Summary

Issues Involved:
1. Demand of Central Excise duty and penalties imposed on M/s. Woolways India Ltd. and their Managing Director.
2. Allegation of fictitious and non-existent job workers.
3. Evidence of exportation of finished products.
4. Imposition of penalties under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Demand of Central Excise Duty and Penalties:
The appellants, M/s. Woolways India Ltd., a recognized export house, imported acrylic fiber without payment of duty under the duty exemption scheme of the Export-Import Policy. They converted the fiber into yarn and subsequently into garments, which were exported. The Commissioner confirmed the demand of Central Excise duty and imposed penalties, holding that the yarn was manufactured in their factory and cleared for home consumption without payment of duty. The appellants argued that the entire quantity of yarn was either exported or used in the manufacture of exported garments, and no evidence was provided by the Department to show clandestine removal of yarn.

2. Allegation of Fictitious and Non-existent Job Workers:
The Revenue's investigation revealed that the job workers to whom the fibers were sent for conversion into yarn were fictitious. Summons issued to these job workers were returned undelivered, and some addresses were found to be non-existent. The handwriting analysis of bills indicated that they were written by the same person, suggesting that the documents were fabricated by the appellants. The appellants, however, failed to provide the names of brokers or records of payments made to job workers, further complicating their defense.

3. Evidence of Exportation of Finished Products:
The appellants presented substantial evidence, including shipping bills, invoices, bank realization certificates, DEEC books, and redemption letters from the licensing authority, to establish that the yarn was used in the manufacture of exported garments. The Revenue did not contradict these documents. The Tribunal noted that the Revenue's case was based on assumptions and lacked tangible evidence to prove clandestine removal of yarn. The Supreme Court's ruling in Oudh Sugar Mills Ltd. v. UOI was cited, emphasizing that duty cannot be confirmed based on suspicion alone.

4. Imposition of Penalties:
The appellants contended that penalties under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944, were not justified due to the overwhelming evidence of exportation. They argued that no penalty under Rule 209A was imposable on the Managing Director as he acted under the bona fide belief that no excise duty was payable on finished or intermediate products used in export manufacturing. The Tribunal found that the Revenue failed to provide evidence of the appellants' knowledge or belief that the goods were liable to confiscation.

Conclusion:
The Tribunal concluded that the Revenue's investigation was insufficient and based on unwarranted assumptions. The appellants provided substantial evidence of exportation, and the Revenue did not disprove these documents. The Tribunal set aside the impugned order and allowed the appeals, emphasizing that findings based on suspicion without tangible evidence are legally flawed.