1997 (11) TMI 297 - AT - Central Excise

Summary

Issues:
1. Alleged clandestine removal of goods and duty recovery.
2. Discrepancies in stock and duty demands.
3. Application of extended period for duty recovery.
4. Allegations of suppression and incorrect entries in registers.
5. Justification for duty demands and findings of the Collector.
6. Plea of limitation and negligence in maintaining records.
7. Imposition of penalty and confiscation of plant and machinery.
8. Applicability of Rule 226 for incorrect maintenance of accounts.

Analysis:

1. The case involved the alleged clandestine removal of goods and duty recovery based on shortages and excesses discovered during a physical verification by Central Excise staff at multiple companies sharing common licenses. The Collector's order dropped the demand for clandestine removal but confirmed the demand for shortages, leading to the appeal.

2. The appellant contended that shortages were due to incorrect entries in the register, similar to the explanation accepted for excesses. The Departmental Representative argued that deliberate suppression was alleged, and relevant documents were not produced to explain the shortages, which were identified by comparing figures in various documents.

3. The notice for shortages was issued beyond the six-month period, invoking the extended period under Section 11A. However, it did not specifically allege suppression or reasons as required by the proviso. The Collector's order did not address the applicability of the extended period for shortages, emphasizing the need for positive acts or omissions to establish liability under the proviso.

4. The Collector's order highlighted clerical errors in entries leading to shortages, citing examples of incorrect postings in the register. The order did not attribute deliberate suppression to the entries, emphasizing the necessity of positive actions to establish liability under the law.

5. Duty demands amounting to crores were based on the completion of goods partially manufactured by other companies, reflected in the appellant's register. The Collector rejected the allegation that the goods were solely manufactured by the appellant based on register entries, indicating a lack of evidence to support the claim.

6. The Collector's finding on the lack of evidence for manufacturing the goods by the appellant was crucial for the plea of limitation. The absence of factors indicating an intent to evade duty and the negligence in maintaining records raised doubts on the application of the extended period for shortages.

7. The judgment concluded that the extended period of limitation would not apply, leading to the dismissal of duty demands, penalty imposition, and confiscation of plant and machinery. The case was deemed suitable for invoking Rule 226 concerning incorrect maintenance of accounts, which was not invoked by the Department in the notice.

8. Ultimately, the appeal was allowed, and the impugned order was set aside, highlighting the insufficiency of evidence to support duty demands and the lack of grounds for penalty and confiscation, while suggesting the applicability of Rule 226 for addressing incorrect maintenance of accounts.