2014 (8) TMI 816 - AT - Central Excise

Clandestine removal of goods - Whether the adjudicating authority is correct in confirming the demand raised against the main appellant and imposing penalties on the main appellant as well as other individuals on the charge of clandestine removal of the goods i.e. printed and dyed MMF fabrics - Held that - adjudicating authority or the investigating authority have not conducted further investigation to come to a conclusion that the figures indicated in the note book at Page No.9 for the period July to September 2002 are not an amount which is shown as receivable for clandestinely cleared goods. In our considered view, there being no other evidence to indicate that these figures were amount due for the clandestine removal of the goods, reliance placed only on the circumstantial evidences may not carry the case of the Revenue any further. To that extent, we find that the appellant has made out a case for holding that the duty liability ₹ 80,89,255/- for the period July to September 2002 is unsustainable and is liable to set aside. In sum, for the period October 2002 to December 2002, we hold that the demand of the duty liability can be confirmed on the main appellant only for the quantity of man made fabrics cleared to M/s Sangam Prints, M/s Neha Prints as recorded at Paragraph No.13 of the Order-in-Original. To that extent, the appeal filed by the appellant is rejected. Lower authorities are directed to calculate the amount of duty liability on the man made fabrics of 9,33,085 LMs and 1,31,309.75 LMs cleared to these two purchasers. Appellant is also required to pay interest at appropriate rate on all these amounts of duty liabilities. Regarding penalties - Held that - As regards the penalties we find the main appellant is to be penalized with equivalent amount of duty liability as has been worked out by the lower authorities on the clearances made to M/s Sangam Prints, M/s Neha Prints as indicated hereinabove with an option to pay 25% of the duty liability as per Section 11AC of Central Excise Act, 1944, as has been held by Hon ble High Court of Gujarat in the case of Akash Fashions Prints Pvt.Ltd. 2009 (1) TMI 113 - GUJARAT HIGH COURT . These our findings are based upon the fact that the adjudicating authority in the impugned order, has not extended this benefit to the main appellant - Decided partly in favour of assessee. Levy of penalty on recipient of goods - Held that - Since they were aware that the goods are non duty paid, penalty under Rule 26 is imposable on them also, which in our considered view, should be in proportion to the quantity of the goods received by them. The ends of justice will be met by imposing a penalty of ₹ 1 lakh (Rupees One Lakh only) on Shri Brij Mohan Agarwal.

Summary

Issues Involved:
1. Legitimacy of the demand for duty for the period July 2002 to September 2002.
2. Legitimacy of the demand for duty for the period October 2002 to December 2002.
3. Validity of the Panchnama.
4. Imposition of penalties on the main appellant and other individuals.

Issue-Wise Detailed Analysis:

1. Legitimacy of the demand for duty for the period July 2002 to September 2002:
The demand for this period was based on figures found in a loose paper, which lacked any indication of being related to linear meters of processed fabrics. The appellant's director stated these figures represented job charges due from customers, not clandestine clearances. The adjudicating authority dismissed this defense, citing discrepancies in ledger accounts. However, the Tribunal found this reasoning flawed, as higher figures in the ledger could still include the amounts in question. The Tribunal concluded that there was no corroborative evidence of clandestine removal for this period, thus setting aside the demand of Rs. 80,89,255/-.

2. Legitimacy of the demand for duty for the period October 2002 to December 2002:
The demand for this period was partly upheld. The Tribunal found sufficient evidence of clandestine removal to M/s Sangam Prints and M/s Neha Prints, based on confessional statements from their officials. However, for M/s Karishma Prints and other alleged buyers, there was no supporting evidence. The Tribunal confirmed the duty liability for the quantities cleared to M/s Sangam Prints and M/s Neha Prints but set aside the demand for other buyers. The lower authorities were directed to recalculate the duty based on the confirmed quantities.

3. Validity of the Panchnama:
The Tribunal rejected the appellant's challenge to the Panchnama's validity. The Panchnama was recorded over an extended period from the afternoon of 9.1.2003 to the afternoon of 10.1.2003. The Tribunal found no basis to discredit the Panchnama based on the dates of signatures.

4. Imposition of penalties on the main appellant and other individuals:
The Tribunal upheld the penalty on the main appellant equivalent to the confirmed duty liability, with an option to pay 25% of the duty under Section 11AC of the Central Excise Act, 1944. The penalties on other individuals were reworked based on the reduced duty liability. Shri Suresh Kumar Agarwal was penalized Rs. 2 lakhs under Rule 26 of Central Excise Rules, 1944, for his role in the clandestine removal. Shri Bharat Kumar Agarwal and M/s Neha Prints, being aware recipients of non-duty-paid goods, were penalized Rs. 1 lakh and Rs. 25,000 respectively under Rule 26.

Conclusion:
The Tribunal disposed of the appeals by setting aside the demand for July to September 2002, partially upholding the demand for October to December 2002, and reworking the penalties accordingly. The Tribunal did not find it necessary to address further arguments presented by both sides. All appeals were disposed of as indicated.

(Pronounced in Court on 25.08.2014)