2005 (3) TMI 192 - AT - Central Excise

Demand and penalty - Clandestine manufacture and removal - vehicle carried excess goods - corroborated statements - HELD THAT - A significant thing to be noted is when the vehicle was intercepted and the invoice was perused, duty particulars were not written in words. This factual position corroborates Shri Gopal Gupta's statement. Therefore to hold that Shri Gopal Gupta's statement is not at all corroborated is not correct. The entire statement of Shri Gopal Gupta is very revealing. On the point of manipulation of invoice, Shri Bhavani Kishore, Accountant of M/s. GSML, has elaborated in great detail, which, in our view could not have been the imagination of the Investigation Officers. Shri Bhavani Kishore has clearly stated that the duty is paid on only 10% of the actual quantity cleared. He has also stated that the practice of putting a decimal and showing lesser duty is as per the directions of the Managing Director Shri Gopal Gupta. Shri Subash Agarwal, Proprietor of M/s. SNT has also stated that they received processed fabrics from M/s. GSML with bills and without bills. In respect of goods purchased without bills the payments are made in cash. We are very sure that humanly it would be impossible to establish all the links of clandestine activity without any break. In this case, the statements or the admissions are supported by the recovery of non-duty paid goods as well as incriminating documents. A modus operandi of paying only one tenth of the duty actually payable has been graphically described by Shri Gopal Gupta and Shri Bhavani Kishore in their statements. Hence, in our view, the adjudicating authority has rightly confirmed the demand based on the quantity of 11 lakh Lmts. of MMF cleared without payment of duty on the basis of admission by Shri Gopal Gupta, corroborated by the incriminating documents, unaccounted goods and the statements of all others. When a fact is admitted it doesn't need further corroboration. We have no reason to believe that the statements have been taken under duress. We also hold that the retraction made after two months is an after thought. The denial of cross-examination of the two persons Shri Bhavani Kishore and Shri Gouri Shanker Gupta does not vitiate the proceedings. These people have not retracted their statements also. Thus, we hold that the OIO is legal and proper. Shri Gopal Gupta, Shri Subash Agarwal, Shri Nirmal Kumar Gupta and Shri Kamal Kumar Gupta have dealt with the goods, which they knew was not duty paid. They are rightly liable for penalty under Rule 209A. The clandestine removal is clearly established by various circumstantial evidences. Therefore we reject all the appeals and uphold the OIO.

Summary

Issues Involved:
1. Detection of shortages and excesses of MMF during stock verification in the factory of GSML on 15-5-1997.
2. Seizure of unaccounted MMF in transit.
3. Seizure of unaccounted MMF in the premises of dealers (M/s. SNT, M/s. KT, M/s. HTD).
4. Clearances of excess quantities of MMF by manipulation of the entries in the invoice.

Issue-wise Detailed Analysis:

1. Detection of Shortages and Excesses of MMF:
The Central Excise Officers conducted a search on 15-5-1997, revealing discrepancies in the stock of finished products at GSML's factory. The officers found shortages and excesses, indicating irregular maintenance of accounts. The adjudicating authority concluded that GSML had clandestinely cleared 11 lakh Lmtrs. of processed MMF without paying duty from January 1997 to May 1997. The fabrics found in excess were confiscated, but GSML was given an option to redeem the goods on payment of a fine.

2. Seizure of Unaccounted MMF in Transit:
During the operation, a vehicle carrying finished goods was intercepted, revealing excess goods on which duty had not been paid. The vehicle was confiscated, and a redemption fine of Rs. 20,000/- was imposed. The adjudicating authority found that the vehicle carried non-duty paid excisable goods, and the duplicate copy of the invoice was manipulated to evade duty.

3. Seizure of Unaccounted MMF in the Premises of Dealers:
The residences and business premises of various dealers were searched, resulting in the seizure of unaccounted goods and incriminating records. The fabrics seized at the premises of M/s. SNT, M/s. KT, and M/s. HTD were confiscated. The adjudicating authority found that these dealers received goods from GSML with and without bills, indicating a pattern of clandestine clearances. The dealers' statements corroborated the findings, and penalties were imposed under Rule 209A of the CE Rules, 1944.

4. Clearances of Excess Quantities of MMF by Manipulation of Invoices:
The investigation revealed that GSML manipulated the entries in the invoices to show lesser quantities and evade duty. Statements from Shri Gopal Gupta, MD of GSML, and other employees detailed the modus operandi of altering invoices to reflect only one-tenth of the actual quantity cleared. The adjudicating authority found that the statements, corroborated by incriminating documents and unaccounted goods, established the clandestine removal of MMF.

Arguments by the Appellants:
The appellants challenged the findings on several grounds, including:
- The demand was based on uncorroborated statements taken under duress.
- Cross-examination of key witnesses was denied.
- The stock verification process was flawed and assumed.
- The kutcha slips recovered did not bear signatures and were not linked to GSML.
- There was no documentary evidence to show that the seized goods were received from GSML without payment of duty.
- The excess stock in the factory and vehicle was due to accounting errors and negligence, not clandestine removal.

Arguments by the Revenue:
The Revenue argued that the adjudicating authority had dealt with all points raised by the appellants and provided sufficient evidence of suppression of production and clandestine removal. The statements were detailed and not taken under duress, and the retraction after two months was an afterthought. The excess consumption of electricity also indicated suppression of production.

Tribunal's Findings:
The Tribunal found that the adjudicating authority had rightly confirmed the demand based on the quantity of 11 lakh Lmtrs. of MMF cleared without payment of duty. The statements of Shri Gopal Gupta and others were corroborated by incriminating documents, unaccounted goods, and the statements of dealers. The denial of cross-examination did not vitiate the proceedings, and the retraction was an afterthought. The clandestine removal was established by circumstantial evidence, and the penalties imposed under Rule 209A were upheld.

Conclusion:
The Tribunal upheld the Order-In-Original (OIO), rejecting all appeals and confirming the demand and penalties imposed by the adjudicating authority. The clandestine removal of MMF by GSML was clearly established through various circumstantial evidences, and the penalties on the individuals involved were justified.