2009 (11) TMI 112 - AT - Central Excise

Non accountal of goods in the RG-1 register - Allegation that there was suppression of actual consumption of raw materials that there was unaccounted production and clandestine removal of the same discrepancies in figures in excise records and those submitted to other authorities - The excess consumption of raw material is more than 16%. - the variation is very high being about 16% and the explanation offered is not at all convincing. No evidence has been produced that any significant quantity has been used for such other purposes like research. - The loose slips seized also indicated removal of finished goods and they were not able to correlate the entries in the said loose slips with the entries in the statutory records like RG-1 register and gate passes evidencing clearance of the said goods on payment of duty. Claim that batch register not maintained for final product is not acceptable The statutory records maintained by them for excise purposes do not reflect the true position. - clearances noted in kachcha slips not entered in statutory records - On the yardstick of preponderance of probability the conclusion reached by the Commissioner that the appellant has indulged in suppression of production and clandestine removal appears legal and proper. - the demand of duty confirmed by the Commissioner based on the short accounted principal raw material using the formula/norms as revealed from the private records resumed from them can not be faulted. The penalty imposed in also justified.

Issues Involved:
1. Unaccounted stock of finished goods.
2. Discrepancies in the quantity of rubber consumed as per Central Excise records and Rubber Board records.
3. Use of "Nulkies" in manufacturing tubes.
4. Entries in the abrasion note book not matching with RG-1 register.
5. Inability to correlate entries in loose slips with statutory records.
6. Use of different code numbers in Kachha challans.
7. Non-disclosure of private records maintenance.
8. Relevance of private records to day-to-day activities.

Detailed Analysis:

1. Unaccounted Stock of Finished Goods
On the date of the officers' visit, there was an unaccounted stock of 818 tyres and 2,357 tubes found in the factory premises. These goods were not accounted for in the RG-1 register, leading to a show cause notice and subsequent adjudication confirming the offending nature of the goods.

2. Discrepancies in Rubber Consumption Records
The appellant's reports to the Rubber Board indicated higher rubber consumption (4,10,000 kgs for 1986-87 and 3,36,200 kgs for 1987-88) compared to the excise records (3,53,416 kgs for 1986-87 and 2,86,453 kgs for 1987-88). This discrepancy suggested suppression of actual consumption of raw materials and unaccounted production. The appellant's defense that the discrepancies were due to rubber used for non-dutiable products, research, and in-process materials was not substantiated with evidence.

3. Use of "Nulkies" in Tube Manufacturing
The records indicated the use of 12,350 nulkies during a period when only 4,350 tubes were shown to have been manufactured. This inconsistency supported the conclusion of unaccounted production.

4. Abrasion Note Book Entries
Entries in the abrasion note book on testing various varieties from 20-10-86 to 3-12-87 did not match with the varieties accounted for in the RG-1 register. This discrepancy further indicated unaccounted production.

5. Correlation of Loose Slips with Statutory Records
The appellant failed to correlate entries in loose slips with statutory records like the RG-1 register and gate passes. This inability to correlate supported the finding of clandestine removal of goods.

6. Different Code Numbers in Kachha Challans
The Kachha challans contained code numbers for tyres that were different from those used in statutory records. This discrepancy was uncovered from dispatch advices with corresponding GR numbers of dispatches from branch offices, indicating manipulation.

7. Non-disclosure of Private Records Maintenance
The appellant did not disclose the maintenance of private records like the stock register, Rubber Board register, and Mixing Formulation register. This non-disclosure violated the requirement to maintain and disclose records under Rule 173(G) of the Central Excise Rules.

8. Relevance of Private Records to Day-to-Day Activities
The private records such as the Mixing Formulation Register, Batch Register/Stock Register, "Typed List," and Abrasion Note Book were found to relate to the day-to-day activities of the appellant company. The Commissioner relied on these private records to conclude that the appellant indulged in suppression of production and clandestine removal.

Conclusion
The Tribunal upheld the Commissioner's findings that the appellant engaged in manipulation of accounts, suppression of production, and clandestine removal of goods without payment of duty. The demand of Rs. 2,76,48,219/- and the penalty of Rs. 10 lakhs were confirmed. The appeal was rejected, and the penalty imposed was deemed justified.

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