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2009 (6) TMI 165 - AT - Central ExciseClandestine removal - 63 consignments were removed clandestinely from Unit No. 1 for Unit no. 2, without recording in the statutory records, without issue of any central excise invoices and without payment of any duty. Appellant plea that fabrication and manipulation of statutory records by a rogue is not acceptable because no remedial measures initiated by management to rein in rogue employee or to introduce a better system of control demand is sustainable and extended period is invocable Held that, whenever a case of short-levy or evasion is detected, an assessee cannot to be allowed to regularize the matter by filing a revised return (ER-1) and erase his past mistakes/lapses, whether it be intentional or inadvertent. Further, we are of the firm view that General Manager cannot be given relief from penalty merely because he did not physically deal with the goods removed clandestinely,
Issues Involved:
1. Non-payment of duty on 63 consignments. 2. Less duty paid on 4 consignments. 3. Delay in duty payment on 69 consignments. 4. Alleged manipulation of ER-1 returns by a rogue employee. 5. Responsibility and authorization of the rogue employee. 6. Clandestine removal of goods. 7. Filing of revised ER-1 returns. 8. Double confirmation of duty amount. 9. Penalty imposition on the General Manager. 10. Liability for interest and mandatory penalty. Issue-wise Detailed Analysis: 1. Non-payment of duty on 63 consignments: The appellants admitted that 63 consignments were removed from Unit No. 1 without payment of duty, involving Rs. 21,37,310/-. The appellants argued that the lapses were procedural as Unit No. 2 would have been eligible for Cenvat credit and all excisable goods were cleared from Unit No. 2 to CIL on full payment of duty. However, the Tribunal upheld the Commissioner's order confirming the demand of Rs. 21,37,310/- as the appellants failed to provide documentary evidence to establish that the consignments were received in Unit No. 2 and cleared on payment of duty. 2. Less duty paid on 4 consignments: The appellants acknowledged the short payment of Rs. 8,833/- on 4 consignments, and this amount was confirmed without dispute. 3. Delay in duty payment on 69 consignments: There was a delay in the payment of duty involving interest of Rs. 3,062/-. This amount was also confirmed without dispute. 4. Alleged manipulation of ER-1 returns by a rogue employee: The appellants contended that the manipulation of ER-1 returns was done by a rogue employee, Mr. J.P. Hebalkar, who was dismissed in August 2004. They argued that if the unauthorized debits made by Mr. Hebalkar were ignored, there would be no short levy. The Tribunal rejected this argument, stating that the debits made by Mr. Hebalkar were within his authorization, and the company had filed a refund application for the debited amount, indicating the company's acknowledgment of the debits. 5. Responsibility and authorization of the rogue employee: The Tribunal found that Mr. Hebalkar acted within his authorization as the General Manager admitted that Mr. Hebalkar was responsible for all central excise matters. The Tribunal held the company responsible for Mr. Hebalkar's actions, citing Section 238 of the Contract Act, 1872, which holds principals liable for the acts of their agents. 6. Clandestine removal of goods: The Tribunal agreed with the Revenue that the removal of goods without payment of duty amounted to clandestine removal. The appellants' argument that it was a case of irregular maintenance of records by a rogue employee was rejected. 7. Filing of revised ER-1 returns: The Tribunal rejected the appellants' contention that the acceptance of revised ER-1 returns for another dispute indicated reconciliation of the present case. The Tribunal noted that there is no provision under Central Excise law for filing revised ER-1 returns to regularize past mistakes or lapses. 8. Double confirmation of duty amount: The Tribunal found that the Commissioner had confirmed an amount of Rs. 24,60,936/- twice, once in respect of the SCN dated 14-6-2004 and again in the SCN dated 14-3-2005. The Tribunal set aside the demand of Rs. 24,60,936/- in the second SCN, modifying the adjudication order. 9. Penalty imposition on the General Manager: The Tribunal reduced the penalty on Mr. Ketkar, the General Manager, from Rs. 5,00,000/- to Rs. 3,00,000/-, acknowledging that the actual manipulations were done by Mr. Hebalkar. The Tribunal rejected the argument that Mr. Ketkar should not be penalized as he did not physically deal with the goods. 10. Liability for interest and mandatory penalty: The Tribunal upheld the imposition of mandatory penalty under Section 11AC of the Central Excise Act, 1944, and the liability to pay interest as per Section 11AB on the confirmed amounts. Conclusion: The appeals were partly allowed, with the Tribunal modifying the adjudication order by setting aside the double confirmation of Rs. 24,60,936/- and reducing the penalty on Mr. Ketkar to Rs. 3,00,000/-. The demands of Rs. 21,37,310/- and Rs. 88,79,121/- were upheld, along with the mandatory penalty and interest.
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