2014 (6) TMI 384 - AT - Central Excise

Duty demand - Unaccounted receipts - Shortage in stock - Recovery of loose slips - Held that - The duty demand of Rs. 2,83,703/- based on allegation of unaccounted receipt of 77.755 MTs of MS angles from S.S.Steel and their use in unaccounted manufacture and clearance of MS angles, the unaccounted receipt of this quantity of MS ingots mentioned in the paper slip had been accepted by Sh. Ranka in his statement. His subsequently plea that out of 77.755 MT of MS angles, 47.715 MT of ingots had actually received from M/s. Aggarwal Steel and is duly accounted for in Form-IV Register has been examined by the Commissioner (Appeals) and he has held that this plea is not acceptable on the ground that the value of the two consignments are different. - Thus the 77.755 MT of MS ingots mentioned in the paper slip as received from S.S.Steel had not been accounted for and hence duty demand of Rs, 2,82,703/- on the finished goods made out of these unaccounted ingots has been correctly upheld. The loose paper slips, in question, containing details of clearance of finished goods on 30.06.08 and details of receipt of MS ingots from S.S. Steel have been recovered from the factory premises of the appellant. Therefore in term of the provision of Sec 36A of the Central Excise Act, 1944, there shall be presumption about the truth of the contents of these paper slips and the burden is on the appellant to prove that their contents are false. In this case, Sh. Ranka, in his statement by explaining the entries in the paper slips has accepted the correctness of their contents. Therefore, there is no reason for discarding this evidence for the purpose of proving the allegation of duty evasion against the appellant - Once on the basis of the documents recovered from a manufacturer s premises, unaccounted purchase of any of the principal raw-material or unaccounted sale of finished goods is clear, a presumption can be made of unaccounted manufacture and clearance of the finished goods without payment of duty and unless the manufacturer produces cogent and concrete evidence in his defense, the allegation of clandestine clearances of finished goods would be treated as proved and duty demand on this basis can be confirmed - duty demand and the penalty has been correctly upheld. - Decided against assessee.

Issues Involved:
1. Alleged shortage of 10.150 MT of MS angles.
2. Alleged non-accountal of 77.755 MT of MS Ingots.
3. Recovery and admissibility of loose paper slips as evidence.
4. Imposition and quantum of penalty under Section 11AC of the Central Excise Act.

Detailed Analysis:

1. Alleged Shortage of 10.150 MT of MS Angles:
The appellant's factory was inspected by the Anti-Evasion Wing of the Central Excise Commissionerate, where officers found a shortage of 10.150 MT of MS angles compared to the recorded stock in the RG-1 Register. This shortage was determined through physical stock-taking in the presence of the appellant's director, who signed the stock verification chart without any protest. The appellant later contended that the weighment was done by eye estimation and not actual weighment. However, the tribunal held that since the appellant did not raise any objections immediately after the stock-taking, they could not contest the shortage later. The tribunal upheld the duty demand of Rs. 68,376/- related to this shortage.

2. Alleged Non-Accountal of 77.755 MT of MS Ingots:
Officers found a slip indicating the receipt of 77.755 MT of MS Ingots from S.S. Steel, which were not accounted for in the appellant's records. The appellant argued that 47.715 MT of these ingots were received from M/s. Oswal Steel and were duly accounted for. The Commissioner (Appeals) rejected this claim, noting discrepancies in the value of consignments. The tribunal agreed with this finding and upheld the duty demand of Rs. 2,82,703/- for the alleged clandestine clearance of finished goods made from these unaccounted ingots.

3. Recovery and Admissibility of Loose Paper Slips as Evidence:
The tribunal addressed the appellant's claim that the loose paper slips did not pertain to them and were not recovered from their premises. The tribunal noted that the slips were listed in the Resumption Memo, which was signed by the appellant's director without protest. The director also explained the entries in the slips during his statement. The tribunal held that under Section 36A of the Central Excise Act, there is a presumption about the truth of the contents of documents recovered from the appellant's premises. The tribunal found no reason to discard this evidence, thus supporting the duty demands based on these slips.

4. Imposition and Quantum of Penalty under Section 11AC:
The appellant had paid the entire duty demand of Rs. 3,51,119/- before the issuance of the Show Cause Notice. However, the Assistant Commissioner did not provide the option to pay a reduced penalty of 25% of the duty demand within 30 days, as per the proviso to Section 11AC. Citing the Hon'ble Delhi High Court's judgment in K.P. Pouches, the tribunal concluded that the appellant should be given the benefit of paying a lower penalty. Consequently, the tribunal reduced the penalty under Section 11AC to 25%, provided it is paid within 30 days.

Conclusion:
The tribunal upheld the duty demands and penalties related to the alleged shortage of MS angles and the non-accountal of MS ingots. The tribunal also affirmed the admissibility of the loose paper slips as evidence. However, the penalty under Section 11AC was reduced to 25% of the duty demand, provided it is paid within 30 days.

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