2001 (5) TMI 569 - AT - Central Excise

Issues Involved:
1. Confirmation of duty demand and penalties against Sunco Rubbers and Jayton Polymers.
2. Allegations of suppressed manufacture and manipulation of clearances to avail slab exemption.
3. Validity of the show cause notice and the invocation of the extended period of limitation.
4. Reliability of the statements recorded during the investigation.
5. Appropriateness of the penalties imposed under various rules of the Central Excise Act and Rules.

Detailed Analysis:

1. Confirmation of Duty Demand and Penalties:
The Commissioner confirmed a duty demand of Rs. 3,68,902/- against Sunco Rubbers under Rule 9(2) read with the proviso to Section 11A of the Central Excise Act. Additionally, Rs. 12,234/- was ordered to be recovered under Rule 57-I for irregular credit availed on raw materials found short. Jayton Polymers was ordered to recover Rs. 2,04,468/- under Rule 57-I(1). Penalties were imposed: Rs. 3,81,136/- on Sunco Rubbers and Rs. 2,04,468/- on Jayton Polymers under Rule 173Q read with Section 11AC and sub-rule 4 of Rule 57. Personal penalties of Rs. 5000/- each were also imposed on individuals under Rule 209A of the Central Excise Rules.

2. Allegations of Suppressed Manufacture and Manipulation:
The department alleged that Sunco Rubbers suppressed the manufacture of 29,036 kgs of tread rubber by manipulating the clearance of 29,191.52 kgs of compounded rubber through Jayton Polymers. It was suspected that Jayton Polymers was created by Sunco Rubbers to avail of separate slab exemptions under Notification 56/88. The allegations were based on:
- Commonality of key personnel between the two companies.
- Discrepancies in electricity consumption and production figures.
- Statements from Sunco Rubbers' employees indicating manipulation.

3. Validity of Show Cause Notice and Extended Period of Limitation:
Sunco Rubbers contended that the show cause notice was barred by limitation and that the extended period was invoked deliberately to overcome this limitation. They argued that the shortages of final products and inputs were satisfactorily explained and that the notice was issued after 3 years and 3 months, making it time-barred. They cited several judgments to support their contention that the notice was invalid due to the delay.

4. Reliability of Statements Recorded:
The appellants argued that the statements recorded from their employees were not voluntary and were taken under coercion and threat. They pointed out inconsistencies in the statements and contended that the statements should not be relied upon. They emphasized that the production manager's statement regarding the capacity for production was more reliable than those of other employees who lacked technical knowledge.

5. Appropriateness of Penalties:
The appellants argued that the penalties imposed were unjustified and based on assumptions and presumptions. They contended that the Commissioner failed to consider statutory records and 57F(3) challans, which proved that Jayton Polymers received inputs from Sunco Rubbers and manufactured and cleared final products as per the statutory records. They also argued that there was no connivance or acts of omission by the employees, making the penalties under Rule 209A inapplicable.

Conclusion:
The Tribunal found that the Commissioner did not pass a speaking order and failed to critically analyze the evidence and statements. The show cause notice was issued after a significant delay, violating principles of natural justice. The Commissioner was directed to re-examine the case, consider all statutory documents as primary evidence, and allow cross-examination of witnesses. The penalties and duty demands were set aside, and the case was remanded for de novo consideration. The Tribunal emphasized the importance of following the principles of natural justice and providing a fair opportunity for the appellants to present their case.

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