2014 (2) TMI 112 - AT - Central Excise

Duty demand - Clandestine removal of goods - Goods cleared without payment of duty - Held that - Allegation against the appellant company is clandestine clearances without payment of duty of HDPE/PP Bags involving the duty of Rs. 7,77,256/-. The basis of this duty demand confirmed by the Additional Commissioner and upheld by the Commissioner (Appeals) is three documents recovered from the office of the appellant company in their factory premises in course of search. The first two documents are in form of computer generated charts giving details of dispatches during May 98 & July 98 - duty demand of Rs.5,65,466/- in respect of the entries in the dispatch charts for the month of May, 1998 and July, 1998, where no invoice numbers are mentioned, is not sustainable as the omission to mention the invoice number is either due to mistake of the person, who had prepared these charts as the goods were covered by other invoices or there were no dispatches as the sale orders had been cancelled. Allegation of non-accountal of 5,000 bags, it is seen that the appellant packed 500 bags in one bale and 10 such bales were in excess of the balance recorded in RG-I register. There is, thus, non-accountal of 5,000 bags in RG-1 register and hence, the same have been correctly confiscated. In view of this, confiscation of the bags not accounted in the RG-I register and imposition of redemption fine in lie of confiscation has to be upheld. However, no penalty would be imposable on this count as there is no evidence indicating that non-accountal was with the intention to clear the goods clandestinely - except for confiscation of 5,000 bags and redemption fine imposed in respect of the same, rest of the order is set aside - Decided in favour of assessee.

Issues Involved:
1. Allegation of clandestine clearances without payment of duty.
2. Discrepancies in invoice numbers and customer names in the dispatch charts.
3. Non-accountal and confiscation of excess stock of HDPE/PP bags.
4. Imposition of penalties on the appellant company and its employees.

Detailed Analysis:

1. Allegation of Clandestine Clearances Without Payment of Duty:
The central issue revolves around the alleged clandestine clearances of HDPE/PP bags without payment of duty, based on computer-generated charts and a document titled 'Highlights: Month July'98'. The charts indicated customer-wise sales details for May and July 1998, with some entries lacking invoice numbers and others showing discrepancies in customer names and quantities. The department alleged that goods valued at Rs.13,56,153/- in May and Rs.9,05,711/- in July were cleared without payment of duty. However, the appellant contended that the charts were prepared by the Sales Department based on sales orders, some of which were canceled, and others were cleared under different invoices on payment of duty. The tribunal found that the department did not provide evidence from transporters or customers to support the allegation of clandestine clearances. Thus, the duty demand of Rs.5,65,466/- based on missing invoice numbers was deemed unsustainable.

2. Discrepancies in Invoice Numbers and Customer Names:
The remaining duty demand was based on discrepancies in invoice numbers and customer names between the dispatch charts and actual invoices. The appellant provided detailed explanations, stating that orders were received through commission agents, and the charts mentioned the agents' names while invoices were issued to actual customers. The tribunal accepted the appellant's explanation, noting that there was no evidence of goods being received by both the agents and the customers mentioned in the invoices. It was concluded that discrepancies were due to mistakes by the person preparing the charts or due to the nature of order procurement. Therefore, the duty demand based on these discrepancies was also found unsustainable.

3. Non-Accountal and Confiscation of Excess Stock of HDPE/PP Bags:
During the search, 5,000 excess HDPE/PP bags were found, which were not accounted for in the RG-I register. The tribunal upheld the confiscation of these bags and the imposition of a redemption fine, as non-accountal was evident. However, no penalty was imposed on this count due to the lack of evidence indicating an intention to clear the goods clandestinely.

4. Imposition of Penalties on the Appellant Company and Its Employees:
The Additional Commissioner had imposed penalties under Section 11 AC on the appellant company and under Rule 209A of the Central Excise Rules, 1944, on two employees. The Commissioner (Appeals) upheld the penalties on the company but set aside the penalties on the employees. The tribunal, finding the duty demands unsustainable, set aside the penalties on the appellant company as well, providing consequential relief.

Conclusion:
The tribunal concluded that the duty demands based on the alleged clandestine clearances and discrepancies in dispatch charts were unsustainable due to lack of corroborative evidence. The confiscation of 5,000 excess bags was upheld, but no penalty was imposed for their non-accountal. The penalties on the appellant company were set aside, and the appeal was disposed of accordingly.

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