2004 (9) TMI 249 - AT - Central Excise

Clandestine removal - Demand - Non-accountal of raw materials - Evidence - Penalty - HELD THAT - In my view, the contention of the Counsel deserves to be accepted. In the Panchnama, which was prepared at the spot it had been recorded that raw material which involved credit of Rs. 90,224/- was not accounted for by the appellants. In the show cause notice, it has been also alleged that the inputs involving credit of this amount were removed by the appellants as such. Therefore, statement of Shri Arvind Agarwal, Partner of the appellant-firm that, raw materials involving this much credit amount, was utilised in the manufacture of the goods which were cleared by them through Sl. Nos. 1 to 16. Once the duty is being confirmed against the appellants in respect of those goods, the amount in question, as a Modvat credit, cannot be recovered from them. After having saddled with the duty amount, for having removed the excisable goods without duty, they are entitled to claim the credit on the raw material used in the manufacture of those goods. Therefore, the confirmation of duty of the amount of Rs. 90,224/- against the appellants, cannot be sustained and is set aside. Thus, the impugned order stands accordingly modified, regarding the confirmation of duty amounts, detailed above. Hence, the penalty on the appellant-firm is also reduced to Rs. 30,000/-. However, penalty on appellant No. 2, partner of the appellant-firm, is set aside. On re-quantification of the duty amounts, the appellants shall pay the same accordingly. The appeals of the appellants accordingly stand disposed off.

Summary

Issues involved: Confirmation of duty on clandestine removal of goods, non-accountal of raw materials, and penalty imposition.

Clandestine removal of goods:
The Commissioner (Appeals) confirmed duties of Rs. 1,85,792/- and Rs. 73,277/- for removal of goods without payment of duty. The appellants contested the duty of Rs. 1,85,792/- based on challans, admitting only up to Sl. Nos. 1 to 16. It was argued that challans 17 to 27 belonged to other firms. The Tribunal found that the goods on challans 17 to 27 were cleared by other firms, not the appellants. Thus, duty for goods cleared through these challans could not be confirmed against the appellants. Duty for goods cleared through challans 1 to 16 was upheld as admitted by the partner of the appellant-firm.

Non-accountal of raw materials:
A demand of Rs. 90,224/- was made for raw materials found short, allegedly used in manufacturing final products removed clandestinely. The Tribunal held that since duty was already demanded on the final products, recovering double duty was not permissible. The demand was related to Modvat credit availed on the raw materials found short. The Tribunal accepted the argument that once duty was confirmed on the final products, the Modvat credit amount could not be recovered from the appellants. The duty confirmation of Rs. 90,224/- was set aside.

Penalty imposition:
The penalty on the appellant-firm was reduced to Rs. 30,000, considering the facts and circumstances of the case. However, the penalty on appellant No. 2, partner of the appellant-firm, was set aside. The duty amounts were to be re-quantified, and the appellants were directed to pay accordingly. The appeals of the appellants were disposed of in light of the modifications made to the impugned order.