2004 (6) TMI 212 - AT - Central Excise

Demand - Clandestine manufacture and removal - wrongful availment of Modvat credit - use of parallel invoices - HELD THAT - There is nothing on record to suggest if any show cause notice was issued to M/s. PPAI along with the appellants, for manufacture and removal of goods in a clandestine manner. From the statement of representative of M/s. S.S. Spares to whom the goods were supplied, it is evident that said firm purchased the goods from M/s. PPAI and made payment through cheque. Similarly, the receipt of goods from that firm has not been denied by M/s. Chadha Autolines, the buyer. It is not the case of the department that M/s. PPAI was dummy unit created only on paper by the appellants as no charge of clubbing of the clearance of that firm with that of the appellant company, had been made in the show cause notice. It is well settled that the charge of clandestine manufacture and clearance of goods against the manufacturer cannot be based only on presumptions and assumptions. It is to be proved by concrete evidence which is lacking in the present case. Therefore, the duty demand confirmed by the adjudicating authority under this charge against the appellant company cannot be sustained and is set aside. The duty demand on the short found goods in respect of short found inputs, has not been contested before us. Therefore, the impugned order in this regard is maintained. The newly manufactured goods were cleared by the appellants on payment of duty as is evident from the evidence of Harish Chandran, Manager (Accounts) of the appellant company whose statement was recorded during investigation. The goods which were received under 57F challans were returned by the appellants after removal of defects as we find from the record. Therefore, the Cenvat credit on the rejected goods, received under duty paying documents and utilized as inputs by the appellants, could not be disallowed. The impugned order confirming duty by denying the Cenvat cannot be sustained and is set aside. Thus, part of the impugned order regarding the confirmation of duty on company appellant No. 1, is upheld, while the rest of the impugned order against all the appellants is set aside. The appeals of the appellants accordingly stand disposed of in the above terms.

Summary

Issues Involved:
The judgment involves issues related to duty demand, penalties, clandestine manufacture, wrongful availment of Modvat credit, and use of parallel invoices.

Duty Demand and Penalties:
The appeals were directed against an order confirming duty demand and penalties imposed on the appellants for various amounts. The duty demand was raised based on clandestine manufacture, shortage of goods/inputs, and wrongful availment of Modvat credit. The appellants denied the allegations, leading to the impugned order.

Contentions and Evidence:
The appellants argued that the demand for clandestine removal was based on excess use of steel and parallel invoices without convincing evidence. The Department contended that there was sufficient evidence to support the duty demand. The Tribunal found that no presumptions could be legally drawn based on the average use of steel, as other inputs were also used in manufacturing steering wheels.

Clandestine Manufacture:
The Tribunal noted discrepancies in the allegations of clandestine manufacture and removal, emphasizing the lack of concrete evidence. Previous legal precedents were cited to support the requirement of concrete evidence in such cases.

Use of Parallel Invoices:
Allegations of using parallel invoices for clandestine clearance were also contested. The Department claimed that goods were cleared using parallel invoices without duty payment. However, the Tribunal found insufficient evidence to support these claims, highlighting discrepancies in the invoices and lack of proof of unaccounted goods or extra raw material usage.

Decision and Disposition:
The Tribunal set aside the duty demand related to clandestine manufacture due to lack of concrete evidence. The duty demand on short found goods and inputs was maintained. However, the denial of Cenvat credit on rejected goods was overturned, as the appellants had followed proper procedures. The impugned order was partially upheld, confirming duty on certain aspects while setting aside the rest, leading to the disposal of the appeals.