2005 (11) TMI 145 - AT - Central Excise

Summary

Issues: Allegation of clandestine removal of goods, demand of duty, imposition of penalty, invocation of extended period of limitation, physical control of the department, reliance on internal records, justification of findings by the lower appellate authority, plea against the finding of clandestine removal, examination of limitation issue.

The judgment involves a case where the respondents, engaged in manufacturing activities as a 100% Export-Oriented Undertaking (EOU), were accused of clandestinely removing goods, specifically 25,349 Kgs. of yarn, resulting in a demand for duty of Rs. 10,79,335. The Central Excise department issued a show-cause notice invoking the extended period of limitation under Section 11A (1) of the Central Excise Act. The original authority confirmed a duty demand of Rs. 3,72,835 and imposed an equal amount of penalty under Section 11AC, which was later set aside by the Commissioner (Appeals). The Revenue appealed this decision, contesting the absence of evidence of clandestine removal found by the appellate authority.

The lower appellate authority justified its conclusion by highlighting the lack of confessional statements or documentary evidence supporting the allegations. The authorized representative of the company argued against the invocation of the extended period of limitation, emphasizing the physical control of the department over their unit and the absence of intent to evade duty, citing relevant legal precedents. The department countered these arguments, asserting that physical control did not imply continuous monitoring and pointing to statements indicating clandestine removal.

The judgment carefully analyzed the evidence presented, including internal records like Monthly Manufacturing Reports (MMRs) and Profit & Loss Account. The Tribunal noted that entries in private records alone were insufficient to prove clandestine removal. It emphasized the lack of concrete evidence such as excess inputs or electricity usage, physical removal of goods, or confessions by employees to support the allegations. Notably, the proposal to penalize key personnel associated with production and clearance was dropped, weakening the Revenue's case. Consequently, the findings of the Commissioner (Appeals) were upheld on merits, rendering the examination of the limitation issue unnecessary.

In conclusion, the judgment dismissed the appeal, affirming the lower appellate authority's decision based on the lack of substantiated evidence supporting the allegation of clandestine removal of goods by the respondents. The operative part of the order was pronounced on 11-11-2005.