2009 (6) TMI 572 - AT - Central Excise

Clandestine removal - On the scrutiny of the records, it was found that the records contained details of manufacturing and clearance of the iron and steel products without payment of duty. After the completion of the investigation it was found that the appellant Sai Metal Industries manufactured iron and steel re-rolled products in their factory during the May 1995 to November 1995 and resorted to evasion of central excise duty on the parts manufactured and cleared by non-accountal of raw materials and finished goods. Private note books recovered from other units, whose managing partner stated that they belong to proprietor of assessee firm. Thus the Show cause notice issued for demanding duty, interest and penalty. Held that- private note book and person who maintained them were related to assessee as there was no evidence. Thus charge of clandestine removal upheld. Personal penalty on the partners cannot be imposed.

Issues Involved:
1. Clandestine removal of iron and steel products without payment of duty.
2. Reliance on private records and statements for quantifying demand.
3. Electricity consumption as evidence for excess production.
4. Imposition of penalties on the firm and its partner.
5. Interest on the duty amount.

Issue-wise Detailed Analysis:

1. Clandestine Removal of Iron and Steel Products Without Payment of Duty:
The case revolves around the allegation that Sai Metal Industries (SMI) clandestinely removed iron and steel products without accounting for them and without paying the required central excise duty. The investigation revealed that SMI manufactured and cleared iron and steel products during May 1995 to November 1995 without payment of duty, as evidenced by private records and corroborated by statements from various individuals involved in the supply chain and weigh bridge authorities.

2. Reliance on Private Records and Statements for Quantifying Demand:
The appellants argued that the show cause notice was based on uncorroborated evidence and assumptions. They contended that the private records used to quantify the demand were not reliable as the persons who maintained these records were not examined or cross-examined. However, the adjudicating authority found that the private records were corroborated by other evidence, such as statements from suppliers and weigh bridge authorities. The Tribunal noted that the private records also contained entries of statutory clearances, indicating their authenticity. The statements of employees and other individuals involved further supported the clandestine removal allegations.

3. Electricity Consumption as Evidence for Excess Production:
The adjudicating authority used electricity consumption data to support the allegation of excess production. It was observed that the electricity consumption during the period of alleged clandestine removal was significantly higher than during periods when goods were cleared on payment of duty. The Tribunal upheld this approach, noting that the appellants failed to provide contrary evidence to explain the higher electricity consumption. The Chartered Accountant's certificate provided by the appellants was deemed insufficient to counter the evidence of excess production based on electricity consumption.

4. Imposition of Penalties on the Firm and Its Partner:
The adjudicating authority imposed penalties on Sai Metal Industries and its partner, Shri Sanjeev Kumar Mishra. The Tribunal upheld the penalty on Sai Metal Industries but set aside the penalty on Shri Sanjeev Kumar Mishra. The Tribunal referred to previous decisions indicating that penalties should not be imposed on both the partnership firm and its partners for the same contraventions.

5. Interest on the Duty Amount:
The Tribunal upheld the imposition of interest under Section 11AA of the Central Excise Act, 1944, as the appellants did not challenge this aspect of the adjudication order. The adjudicating authority had correctly imposed interest under this section, and the Tribunal found no reason to interfere with this part of the order.

Conclusion:
The Tribunal confirmed the demand of Rs. 22,80,480/- as central excise duty on the clandestinely removed goods and upheld the penalty on Sai Metal Industries. The penalty on the partner, Shri Sanjeev Kumar Mishra, was set aside. The interest imposed under Section 11AA was also upheld. The appeals were disposed of accordingly.

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