2009 (4) TMI 323 - AT - Central Excise

Charge of clandestine removal - assessee is aggrieved over the confirmation of demand on account of non-accountal of the quantity of scrap to the extent of 2602.500 MTs - it is very difficult to accept the learned advocate (for the assessee s) contention that these 2602.500 MTs. were used for trading - Private records have been recovered from the residence of Shri Muralidharan, Production Manager and the Bills of the Labour Contractor, Shri A.K. Ranu have also been scrutinized. Shri Ranu has, in his statements, dated 11-11-1996 and 12-11-1996, confessed suppression of production and clandestine clearance. All these evidences point to the fact that SSL was systematically suppressing production of Ingots and Rolled products. In our view, there is enough circumstantial evidence to hold unaccounted production in respect of 2602.500 MTs. Even though, the original demand was very huge, the Commissioner has scaled it down only to the demand on account of non-accountal of 2602.500 MTs of scrap. In our view, it is a very fair decision and his order is sustainable. But, however, we find that he had not given any allowance for the Modvat credit. According to him, the scrap is converted into Ingots and the Ingots, in turn, is used in the production of re-rolled products. So, while coming to the conclusion on demand of duty, he has not given the benefit of Modvat credit and also the cum-duty benefit. In terms of the Hon ble Supreme Court s decision in the case of CCE v. Maruti Udyog Ltd. - 2002 (141) E.L.T. 3 (S.C.), this also should be given. In view of this, while upholding the demand of duty on account of non-accountal of the scrap to the extent of 2602.500 MTs, we remand the matter to the Commissioner for re-determining the duty liability.

Summary

Issues Involved:
1. Demand for differential duty.
2. Imposition of penalties.
3. Confiscation of lands, buildings, and machinery.
4. Recovery of irregularly availed Modvat credit.
5. Confiscation of funds in bank accounts.
6. Appeals by the Revenue against the reduction of penalties and non-imposition of penalties.

Issue-wise Detailed Analysis:

1. Demand for Differential Duty:
The Commissioner demanded differential duty amounting to Rs. 67,87,021/- for the period 1993-94 to 1996-97, based on the alleged clandestine production and removal of goods. The main charge was related to the unaccounted procurement of 2602.500 MTs of scrap, which was claimed to be used for producing ingots and re-rolled products. The Commissioner concluded that the assessees were liable for the differential duty based on the evidence from private records and statements from various parties, including the labour contractor and production manager, which indicated systematic suppression of production.

2. Imposition of Penalties:
The Commissioner imposed penalties on the firm and several executives under Section 11AC and Rule 209A of the Central Excise Rules. The penalties ranged from Rs. 20,000/- to Rs. 10,00,000/-. The assessees challenged these penalties, arguing that the findings were based on assumptions and lacked concrete evidence. The Tribunal upheld the imposition of penalties but remanded the matter to the Commissioner for re-determination of the penalty amounts after recalculating the duty liability, considering the Modvat credit and cum-duty benefits.

3. Confiscation of Lands, Buildings, and Machinery:
The Commissioner confiscated the lands, buildings, and machinery but allowed their release on a redemption fine of Rs. 10,00,000/-. The Tribunal upheld the confiscation but reduced the redemption fine to Rs. 1,00,000/-.

4. Recovery of Irregularly Availed Modvat Credit:
The Commissioner ordered the recovery of Rs. 1,91,676/- for irregularly availed Modvat credit on HM scrap. The Tribunal upheld this recovery but remanded the matter for re-determination of the duty liability and the imposition of penalties after considering the Modvat credit and cum-duty benefits.

5. Confiscation of Funds in Bank Accounts:
The Commissioner confiscated the amounts frozen in the bank accounts of M/s. Shree Trading and M/s. MRK Enterprises, amounting to Rs. 14,35,544.37 and Rs. 348.50, respectively, under Section 121 of the Customs Act, 1962. The Tribunal did not provide specific findings on this issue, implying that the confiscation was not contested separately by the assessees.

6. Appeals by the Revenue:
The Revenue appealed against the reduction of penalties and the non-imposition of penalties on certain individuals and entities. The Tribunal found that the Commissioner had not considered all the evidence regarding the diversion of imported scrap and had relied solely on the End Use Certificates. The Tribunal set aside the Commissioner's order and remanded the matter for de novo adjudication, instructing the Commissioner to consider all evidence and re-determine the penalties based on the findings.

Summary of Tribunal's Orders:
- The Tribunal partially allowed the assessees' appeals by remanding the matter to the Commissioner for re-quantification of duty after considering Modvat credit and cum-duty benefits.
- The penalties were to be re-determined based on the recalculated duty liability.
- The confiscation of lands, buildings, and machinery was upheld, but the redemption fine was reduced.
- The Tribunal upheld the recovery of irregularly availed Modvat credit but remanded the matter for re-determination of duty liability and penalties.
- The Tribunal allowed the Revenue's appeals by remanding the matter for de novo adjudication, instructing the Commissioner to consider all evidence and re-determine the penalties.

Disposition of Appeals:
- Assessees' appeals were disposed of by remanding for re-quantification of duty and re-determination of penalties.
- Revenue's appeals were allowed by remanding for de novo adjudication and re-determination of penalties.