2014 (8) TMI 779 - AT - Central Excise

Clandestine manufacture and clearances of man-made fabrics - Imposition of penalty - Held that - Though the names of the merchant manufacturers from whom the goods were received for processing or to whom the goods were sold, were not given by the main appellant but the investigating officers traced out such merchant manufacturers. During the statements recorded all these merchant manufacturers admitted to have got goods manufactured/ received from the main appellant without payment of Central Excise duty. Calculation of duty demand on the clandestine removal of the goods has been calculated by the Revenue on the basis of details made available in the private accounts maintained by the main appellant and the job charges recovered. The stock taking of grey fabrics and semi-finished/ finished fabrics lying in the stock of the main appellant during the course of search also show difference in the stock. Proprietor and authorised signatory of the main appellant agreed to the correctness of the Panchnama, duty evasion calculation and clandestine manufacture and clearances made by the main appellant, which have not been retracted - However, penalty imposed is reduced - Decided partly in favour of assessee.

Summary

Issues:
Clandestine manufacture and clearance of man-made fabrics, imposition of penalty on the main appellant and merchant manufacturers, reduction of penalties imposed on merchant manufacturers.

Analysis:
1. Clandestine Manufacture and Clearance: The case involved the main appellant, a manufacturer of man-made fabrics, where during a search, a private lot register was found containing unaccounted grey fabrics processed without payment of duty. Statements confirmed clandestine activities, and duty demand was calculated based on private accounts and job charges. The main appellant admitted to the evasion, which was not retracted. Stock discrepancies further supported the findings, leading to the conclusion of clandestine activities.

2. Imposition of Penalty - Main Appellant: The Revenue established clandestine activities through documents and statements, justifying the penalty imposed on the main appellant. The appellant argued for a reduced penalty under Section 11AC, which was granted by the Tribunal, providing an option for reduced penalty payment within a specified period. The Delhi High Court precedent was cited to support the correctness of the penalty imposition.

3. Imposition of Penalty - Merchant Manufacturers: The merchant manufacturers involved in the case admitted to receiving goods without paying Central Excise duty. While the main appellant did not disclose their identities, the statements of the manufacturers confirmed the evasion. The penalties on the merchant manufacturers were initially reduced by the Tribunal to align with the circumstances and the interests of justice.

4. Final Decision: The Tribunal allowed the appeals to the extent indicated in the judgment, reducing penalties on the merchant manufacturers. The main appellant's penalty remained upheld, with an option for reduced payment. The decision was pronounced on 22.08.2014, concluding the case involving clandestine activities and penalties imposed on both the main appellant and the merchant manufacturers.