2001 (7) TMI 532 - AT - Central Excise

Summary

Issues Involved:
1. Confirmation of duty demand and imposition of penalties.
2. Shortage of raw materials and alleged clandestine removal.
3. Admissibility of evidence and credibility of documents.
4. Limitation and calculation of duty.

Detailed Analysis:

1. Confirmation of Duty Demand and Imposition of Penalties:
The Commissioner of Central Excise & Customs confirmed a duty demand of Rs. 6,69,893/- against M/s. Sobha Gudakhu Factory under Section 11A of the Central Excise Act read with Rule 9(2) of the Central Excise Rules, 1944. Equivalent penalties were imposed under Rule 173Q. Additionally, a personal penalty of Rs. 1,00,000/- was imposed on the proprietor under Rule 209A.

2. Shortage of Raw Materials and Alleged Clandestine Removal:
The appellant's factory was inspected on 8-3-1996, revealing discrepancies in the stock of tobacco powder and Gudakhu. The appellant attributed the shortage to handling, transportation loss, and return of poor-quality tobacco to the supplier. However, the supplier denied receiving any returns. The Commissioner concluded that the shortage indicated clandestine manufacture and removal of Gudakhu, as the explanations provided by the appellant were inconsistent and unsubstantiated.

3. Admissibility of Evidence and Credibility of Documents:
The appellant produced documents to show the return of tobacco powder and its screening by M/s. Sona Tobacco Company. These documents were found to be fictitious, with discrepancies in letterheads and signatures. The Commissioner rejected these documents, citing the appellant's failure to provide credible evidence or request cross-examination of the supplier. The Tribunal upheld this finding, noting the appellant's shifting explanations and fabricated evidence.

4. Limitation and Calculation of Duty:
The appellant argued that the duty was calculated incorrectly, applying a higher rate than applicable before 23-7-1996. The Commissioner accepted this contention and revised the duty demand to Rs. 6,69,892.50 at a 15% rate. The Tribunal agreed with this adjustment but maintained the confirmed duty amount based on the evidence of clandestine activities.

Conclusion:
The Tribunal upheld the duty demand of Rs. 6,69,892.50 against M/s. Sobha Gudakhu Factory, citing substantial evidence of clandestine manufacture and removal of Gudakhu. The personal penalty on the proprietor was set aside, but the penalty on the factory was reduced to Rs. 3.25 lakhs. The appeal by the factory was partly allowed, while the appeal by the proprietor was fully allowed.