2014 (9) TMI 662 - AT - Central Excise

Clandestine manufacture and removal of excisable goods - Imposition of penalty - Held that - claim of the appellant that TMT bars were not manufactured by them but was part of the trading activity of A.K. Agarwal firm and this assertion was made because the department had found the details in the computer showing sale of TMT bars. It was stated that the computer belonged to A.K. Agarwal firm and was kept in the factory since the M.D and the owner happened to be same and it was also stated that TMT bars was only a part of the trading activity. In fact it appears to be a fact the claim of the appellant that TMT bars were traded itself is wrong and in fact even the invoices in the name of A.K. Agarwal firm did not show any transaction of TMT bars. Only paper transactions or paper records have been created. This is the prima facie conclusion that can be drawn based on the records at this stage. Needless to say this is a very complicated case but fact remains that as regards TMT bars it was the claim of the appellant that this was a trading activity of the firm. The situation is nobody can understand what exactly happened. At this stage therefore the only option that would be available is to rely upon the paper records which are recovered which show that there was a trading of TMT bars which was kept in the administrative office and appellants themselves have claimed that it was a trading activity of the firm and that the firm was trading in TMT bars which has been found to be totally false. The appellant is engaged in the manufacture of TMT bars and therefore when they accepted it was a trading activity of the firm and the firm was owned by the M.D. and firm was not undertaking such activity, the obvious conclusion that would emerge is that the first appellant has manufactured TMT bars and has to account for the same. Therefore we find that appellant has not been able to make out a prima facie case in respect of 3.21 crores. Even if the appeal has to be remanded it cannot be remanded without considering the balance of convenience and justice to the public at large and the Government. In our opinion, having retained the money for more than 5 years, the appellant should deposit at least amount which we have found prima facie payable with a small portion of the interest that is payable if the matter is remanded. Normally the matter should be remanded after noting compliance but to avoid further lapse of time, we consider that it would serve the interest of justice and public interest if the matter is sent back at this stage itself. Therefore the appellant is directed to deposit an amount of ₹ 5 crores - subject to the order of pre-deposit matter remanded back.

Issues Involved:
1. Clandestine manufacture and removal of excisable goods.
2. Non-receipt of documents/CDs by the appellant.
3. Short accountal and undervaluation of billets and TMT bars.
4. Clandestine clearance of sponge iron.
5. Recycling of unaccounted sale proceeds.
6. Financial hardship and pre-deposit requirement.

Detailed Analysis:

1. Clandestine Manufacture and Removal of Excisable Goods:
The appellant was accused of clandestine manufacture and removal of excisable goods, resulting in a duty demand of Rs. 7,42,33,021/- for the period 2007-08 to 2008-09, with interest and penalties under Section 11AC of the Central Excise Act, 1944, and Rule 25 of the Central Excise Rules, 2002. The first appellant had deposited Rs. 10,00,000/- during the investigation.

2. Non-receipt of Documents/CDs by the Appellant:
The appellant claimed they could not defend their case properly due to non-receipt of several CDs and documents. However, the Tribunal noted that the appellant did not make a serious issue of this disadvantage during the proceedings before the Commissioner. The Commissioner had allowed cross-examination and provided additional documents upon request. The Tribunal concluded that the appellant did not make a case for remand based on the non-observance of principles of natural justice.

3. Short Accountal and Undervaluation of Billets and TMT Bars:
The Tribunal examined the short accountal and undervaluation issues listed in the show-cause notice. The significant demand was for clandestine clearance of TMT bars made in the name of a firm owned by the MD. The Tribunal found that the firm had ceased to exist before the period under consideration, and there was no evidence of actual trading activity. The Tribunal concluded that the first appellant had manufactured the TMT bars and had to account for them.

4. Clandestine Clearance of Sponge Iron:
The department concluded that there was excess production of sponge iron not accounted for, based on records and average production calculations. The Tribunal noted that the appellant did not provide evidence to rebut the department's claim. The Tribunal accepted the department's prima facie case that the appellant had clandestinely cleared excess sponge iron.

5. Recycling of Unaccounted Sale Proceeds:
The Tribunal considered the demand related to recycling unaccounted sale proceeds in the guise of trading. The Tribunal found that the demand was based on the difference between sale price and purchase price, which was unusual for Central Excise duty calculations. The Tribunal did not consider this amount for arriving at the quantum of pre-deposit.

6. Financial Hardship and Pre-deposit Requirement:
The appellant argued for waiver of pre-deposit due to financial difficulties, citing accumulated losses. However, the Tribunal noted that the appellant had sufficient current assets and could make the pre-deposit. The Tribunal directed the appellant to deposit Rs. 5 crores within 12 weeks and report compliance. The matter was remanded to the Commissioner for fresh adjudication, with instructions to provide all necessary documents to the appellant and observe principles of natural justice.

Conclusion:
The Tribunal directed the appellant to deposit Rs. 5 crores and remanded the matter for fresh adjudication, ensuring that the appellant receives all necessary documents and a fair opportunity to present their case. The appeal was disposed of with these directions, and non-compliance would result in the revival of the adjudication order.

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