2004 (12) TMI 279 - AT - Central Excise

Clandestine removal - Clubbing of clearances - Show cause notice - Cenvat/Modvat - Demand and penalty

Summary

Issues Involved:
1. Alleged clandestine removal of excisable goods.
2. Non-accounting of manufacture and clearance of excisable goods.
3. Modvat credit without physical receipt of inputs.
4. Availment of quantity credit and duty credit incorrectly.
5. Imposition of penalties and interest liabilities.

Detailed Analysis:

1. Alleged Clandestine Removal of Excisable Goods:
The Commissioner found that RP-M clandestinely removed finished goods under the guise of clearances by JIT. The evidence included the Gate Register, Lab Register, and transporter records. However, the Tribunal found:
- Gate Register: Maintained by a security agency and not exclusive to RP-M. It recorded all receipts and removals from the shared premises, which included JIT, an independent entity. The Tribunal concluded that the register could not solely attribute all entries to RP-M.
- Lab Register: Recorded samples tested at RP-M's lab, including those of third parties. It was not exclusive to RP-M's production and thus could not prove clandestine removal.
- Transporter Records: The Tribunal cited precedents where transporter records alone were insufficient to prove clandestine removal. Statements from buyers and transporters did not conclusively link the goods to RP-M.

2. Non-accounting of Manufacture and Clearance of Excisable Goods:
The Commissioner relied on documents and statements to allege non-accounting of goods. However, the Tribunal found:
- Independent Existence of JIT: JIT was an independent trading firm with its own transactions. The Tribunal found no evidence to conclusively link JIT's activities to RP-M's alleged clandestine removals.
- Documentary Evidence: The Tribunal emphasized that documentary evidence did not establish clandestine removal. Oral statements based on such documents were deemed unreliable.

3. Modvat Credit Without Physical Receipt of Inputs:
The Commissioner found that RP-M availed Modvat credit for inputs not physically received at their premises. The Tribunal considered:
- IPCL Consignments: Some consignments billed to RP-M were actually received at RP-P, their other unit. The Tribunal found this to be a procedural lapse rather than a substantive violation, as both units belonged to the same company.
- Panama Invoices: The Tribunal noted that the inputs were acknowledged by RP-M staff, but the actual receipt was disputed. The credit availed was not in excess of the inputs received across both units.

4. Availment of Quantity Credit and Duty Credit Incorrectly:
The Commissioner alleged incorrect availment of quantity and duty credits. The Tribunal found:
- Rule 57F and 57J: The Tribunal noted that the credit availed was within permissible limits under the relevant rules. The procedural lapses did not justify denying the credit.
- Revenue Neutrality: The Tribunal accepted the defense that the credit availed was revenue-neutral, as the duty was paid by the other unit (RP-P).

5. Imposition of Penalties and Interest Liabilities:
The Commissioner imposed penalties under various rules and sections. The Tribunal found:
- Section 11AC and Rule 57-I(4): Since the duty demand and Modvat credit disallowance were not upheld, the penalties under these provisions were set aside.
- Rule 173Q(1): The Tribunal found no sufficient material to justify penalties under this rule, as the notice and findings were based on lesser penalties.
- Rule 209A: No goods were found liable to confiscation, thus penalties under this rule were also not upheld.

Conclusion:
The Tribunal set aside the orders of the Commissioner, allowing the appeals with consequential relief. The findings emphasized the lack of conclusive evidence to support the allegations of clandestine removal, incorrect accounting, and improper availment of Modvat credit. The penalties and interest liabilities were also not sustained due to the absence of substantive violations.