1999 (4) TMI 386 - AT - Central Excise

Summary

Issues Involved:

1. Alleged clandestine removal and clearance of tyres.
2. Confirmation of duty on seized tyres.
3. Denial of Modvat credit on Carbon Black.
4. Imposition of penalties on individuals and the company.

Summary:

1. Alleged Clandestine Removal and Clearance of Tyres:
The appellants, M/s. Birla Tyres, were alleged to have clandestinely removed 26,914 tyres without payment of duty, based on discrepancies between entries in their "Daily Production Register" and the RG 1 register. The Daily Production Register, maintained by the Curing Section, recorded tyres immediately after curing, but before they underwent further processes like trimming and quality inspection. The appellants argued that the tyres were not marketable at the curing stage and cited Board Circulars and Trade Notices which prescribed RG 1 entry only after all tests and quality checks. The Tribunal agreed, noting that the curing register was a supplementary record and not the final production record. The Tribunal found that the Department failed to provide corroborative evidence of clandestine removal, such as extra procurement of raw materials or discrepancies in raw material stocks. The Tribunal also noted that the cumulative difference of 9432 tyres was explained by scrapped tyres, samples, and tyres in-process. Therefore, the charge of clandestine removal was not sustained, and the demand of Rs. 3,29,60,413.00 and penalty of Rs. 3,30,00,000.00 were set aside.

2. Confirmation of Duty on Seized Tyres:
The Commissioner had vacated the seizure of 55 tyres but imposed a penalty of Rs. 1.00 lakh for keeping duty-paid tyres in an unapproved godown. The Tribunal found no justification for the penalty, given that the tyres were cleared on payment of duty and stored temporarily due to a procedural requirement for a Road Permit. The penalty was set aside.

3. Denial of Modvat Credit on Carbon Black:
The appellants were found to have taken Modvat credit on 36 MT of Carbon Black stored in an unapproved godown. The Tribunal confirmed the reversal of Rs. 1,52,208.00 Modvat credit but set aside the penalty of an equivalent amount and the confiscation with a redemption fine of Rs. 5.00 lakhs, noting that Rule 57-I(4) was not in effect at the relevant time and there was no mala fide intention.

4. Imposition of Penalties on Individuals and the Company:
Penalties of Rs. 2.00 lakhs each on Shri Deepak Tandon, Vice President, and Shri S.C. Sood, Senior Manager, were set aside as the charge of clandestine removal was not proved. The penalty of Rs. 1.00 lakh for keeping duty-paid tyres in an unapproved godown was also set aside.

Conclusion:
The appeals were allowed, setting aside the impugned order except for the confirmed reversal entry of Rs. 1,52,208.00 for the Modvat credit on Carbon Black.