1997 (9) TMI 205 - AT - Central Excise

Issues Involved:

1. Demand of Central Excise duty based on alleged clandestine removal of crown corks.
2. Imposition of penalties on the firm and its Managing Partner.
3. Rejection of the appellant's plea regarding production capacity and power consumption.
4. Refusal to permit cross-examination of employees.
5. Misapplication of the rate of duty at the time of the show cause notice instead of the respective years of production.
6. Correct computation of production days and shifts.

Detailed Analysis:

1. Demand of Central Excise Duty:

The Collector of Central Excise, Cochin demanded Central Excise duty of Rs. 15,72,664.75 from the firm and imposed penalties based on the finding that the firm had manufactured and cleared crown corks without payment of the duty. This finding was primarily based on statements from employees and customers, indicating that the firm produced and sold more crown corks than recorded, and at a higher price than invoiced. The Collector also considered the seizure of crown corks from the Manager's residence as evidence of unaccounted production and clearance.

2. Imposition of Penalties:

The Collector imposed a penalty of Rs. one lakh on the firm and Rs. 50,000 on the Managing Partner, Shri M.J. Johnson, under various Central Excise Rules. The penalties were based on the clandestine production and clearance of goods, supported by employee and customer statements, and the seizure of unaccounted crown corks.

3. Rejection of Appellant's Plea:

The appellant contested the demand, arguing that the production capacity was overstated and that the statements were not voluntary. They provided evidence based on power consumption and raw material usage to support their claim of lower production capacity. However, the Collector rejected these claims, stating that the raw materials were available in the open market and that only part of the materials purchased were recorded. The Collector relied on statements from the Manager and employees, which indicated higher production capacities and unaccounted raw material usage.

4. Refusal to Permit Cross-Examination:

The appellant's request to cross-examine the employees whose statements were used to raise the demand was denied. The Collector did not provide reasons for this denial but noted that the retraction of statements was an afterthought. The Tribunal upheld this finding, agreeing that the retractions were not credible and that the original statements were consistent with customer statements.

5. Misapplication of Duty Rate:

The appellant argued that the rate of duty should be applied based on the respective years of production, not the rate at the time of the show cause notice. The Collector applied Rule 9A(5) of the Central Excise Rules, using the rate in force at the time of the notice. The Tribunal found this to be an error, noting that Rule 9(1)(ii) specifies that the rate of duty should be the rate in force on the date of actual removal of goods. The Tribunal remanded the case for re-determination of duty based on the correct rates applicable during the production years.

6. Correct Computation of Production Days and Shifts:

The appellant contended that the production days and shifts were overstated. They claimed the factory worked fewer days than calculated by the Collector. The Tribunal found merit in this claim, noting discrepancies in the number of working days and shifts. The case was remanded for re-evaluation of the production days and shifts to accurately determine the duty liability.

Conclusion:

The Tribunal set aside the Collector's order and remanded the case for a de novo decision. The Collector was instructed to re-evaluate the production capacity, working days, and applicable duty rates, and to provide the appellant with an opportunity for a personal hearing. The quantum of penalties was also to be reconsidered based on the revised duty determination.

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