2005 (8) TMI 243 - AT - Central Excise

Issues Involved:
1. Allegation of clandestine removal of goods by the assessee.
2. Imposition of penalties under Rule 209A of the Central Excise Rules, 1944.
3. Validity of the evidence presented by the Revenue.
4. Examination of the functional status of the five units involved.
5. Adequacy of infrastructure and resources for manufacturing by the respondent.
6. Legal precedents regarding clandestine removal.

Detailed Analysis:

1. Allegation of Clandestine Removal of Goods:
The Revenue alleged that the assessee manufactured tread rubber by procuring raw materials in the name of other units (M/s. Dhana Rubber Industries, M/s. Everest Rubber Industries, M/s. Fortune Rubber Industries, M/s. Best Polymers, and M/s. Crest Polymex) and cleared the goods clandestinely without payment of duty. The Commissioner, after thorough examination of all the evidence, concluded that there was no substantive proof that the raw materials purchased in the name of the said five units were received and utilized by the assessee for clandestine manufacture and removal of tread rubber. There was no seizure of tread rubber from the premises, nor any evidence of excess stock of raw materials or finished goods.

2. Imposition of Penalties under Rule 209A of the Central Excise Rules, 1944:
The Commissioner imposed penalties on several individuals under Rule 209A but dropped the demands of duty. The penalties were imposed based on the involvement of these individuals in the alleged clandestine activities. However, no penalty was imposed on M/s. Bremels Rubber as the allegations against them were not substantiated. Additionally, penalties were not imposed on certain individuals due to lack of evidence or their non-involvement in the alleged activities.

3. Validity of the Evidence Presented by the Revenue:
The Commissioner found that the evidence presented by the Revenue was insufficient to prove the allegations of clandestine removal. The grounds cited by the Revenue, such as the involvement of employees/ex-employees, use of vehicles for transporting raw materials, and mutual assistance among the units, were deemed inadequate to establish clandestine manufacture and clearance by M/s. Bremels Rubbers.

4. Examination of the Functional Status of the Five Units Involved:
The Commissioner noted that all five units had obtained Central Excise Licenses for manufacturing tread rubber, were registered with the Department of Industries and Commerce as SSI units, and were also registered with the Sales Tax Department. The raw materials were procured, and final products were cleared under documents in the name of the respective units, and they had been filing the necessary excise documents regularly. This indicated that the units were functional and operating legitimately.

5. Adequacy of Infrastructure and Resources for Manufacturing by the Respondent:
The Commissioner observed that there was no evidence to show that the respondent had received the raw materials from the five units and clandestinely manufactured and cleared the goods. The department did not conduct any exercise to ascertain whether the respondent had sufficient electrical power, infrastructure, and manpower to manufacture the alleged quantity of tread rubber. The evidence of power consumption and infrastructure did not support the allegations of clandestine manufacture.

6. Legal Precedents Regarding Clandestine Removal:
The Commissioner referenced several judgments from the Tribunal and High Courts, which ruled that clandestine removal is a positive act and the burden of proving it lies with the department. The judgments emphasized that such allegations cannot be proven merely on conjectures and presumptions. The Commissioner applied these legal principles and concluded that the Revenue failed to establish the case of clandestine removal.

Conclusion:
The Commissioner's order, which dropped the demands of duty and imposed penalties on certain individuals, was upheld. The Revenue's appeals were dismissed, and the Commissioner's findings were confirmed as just, proper, and legal. The detailed examination of evidence and adherence to legal precedents were crucial in reaching this conclusion.

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