2010 (4) TMI 446 - AT - Central Excise

Clandestine removal - Shortage of goods - the respondent that on the receipt of an intelligence report that the appellants were engaged in evasion of Central Excise Duty, the officers of the department kept surveillance upon the factory of the appellants and on 4th July 1997 they intercepted a truck bearing No. MP - 25B - 0003 which was found transporting Ferro Manganese Slag (Fe Mn Slg) outside the factory premises of the appellants. The said consignment was not accompanied by proper documents revealing discharge of duty liability. Thus the Show Cause Notice issued. Held that- the charts which have been prepared by the Adjudicating Authority before arriving at the finding about the clandestine manufacture and removal of the final product the authorities clearly referred to the records, which were seized in the course of inspection as well as records relating to physical verification of the materials available in the factory premises. There is clear observation to that effect prior to the calculations which were made based on such materials found in the premises. Being so, it is difficult to accept the contention that the unfinished products which were lying under the heap were not considered while arriving at the final figure by the authorities below. In the facts and circumstances of the case, therefore, there is no case for interference in the impugned order and hence the appeal fails and is dismissed.

Issues Involved:
1. Alleged evasion of Central Excise Duty.
2. Confiscation of truck transporting Ferro Manganese Slag without proper documents.
3. Recovery of duty on shortfall of Ferro Manganese products.
4. Imposition of interest and penalty on the appellants.
5. Allegation of clandestine removal of goods.
6. Discrepancies in RG-1 register and private records.

Detailed Analysis:

1. Alleged Evasion of Central Excise Duty:
The appellants were engaged in manufacturing various Ferro Alloy products and availing Modvat credit under the Central Excise Rules, 1944. An intelligence report suggested evasion of Central Excise Duty by the appellants. Surveillance led to the interception of a truck transporting Ferro Manganese Slag without proper documents, prompting an investigation and a show cause notice demanding recovery of duty amounting to Rs. 493.76 for the transported slag and Rs. 6,30,334.65 for the shortfall of 207.711 M.T. of Ferro Manganese products.

2. Confiscation of Truck Transporting Ferro Manganese Slag:
The truck intercepted on 4th July 1997 was found transporting Ferro Manganese Slag without proper documentation. The show cause notice questioned why the truck should not be confiscated for contravening legal provisions.

3. Recovery of Duty on Shortfall of Ferro Manganese Products:
The investigation revealed a shortfall of 15.430 M.T. of Ferro Manganese Slag and 207.711 M.T. of Ferro Manganese products in the appellants' factory. The Additional Commissioner confirmed the duty liability for these shortfalls, which was upheld by the Commissioner (Appeals).

4. Imposition of Interest and Penalty on the Appellants:
The Additional Commissioner ordered the payment of interest on the duty amount and imposed penalties. The appellants contested these findings, arguing that the alleged shortage was based on private records and that the RG-1 register entries were made only after screening, grading, and packing.

5. Allegation of Clandestine Removal of Goods:
The appellants argued there was no clandestine removal of goods, as the RG-1 register was updated only after final packing. They claimed the department ignored the fact that unfinished goods were stored in heaps and not entered in the RG-1 register. However, the authorities found discrepancies between the RG-1 register and private records, indicating a shortfall of finished products.

6. Discrepancies in RG-1 Register and Private Records:
The authorities compared the RG-1 register with private records and invoices issued under Rule 52A, revealing significant discrepancies. The physical verification on 4th July 1997 showed a shortfall of 199.756 M.T. of Ferro Manganese Standard Grade and 7.355 M.T. of Ferro Manganese Powder. The appellants' contention that private records were for estimating final production was not supported by evidence.

Conclusion:
The Tribunal found no merit in the appellants' arguments. The calculations and findings of the authorities were based on undisputed records maintained by the appellants. The Tribunal upheld the findings of clandestine manufacture and removal of goods, confirming the duty liabilities, interest, and penalties imposed. The appeal was dismissed, affirming the authorities' decision.

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