2015 (1) TMI 941 - AT - Central Excise

Clandestine Removal - Goods not accounted in RG-1 Register - Held that - Admittedly the entire case has been made out on the basis of loose papers resumed from the factory premises of the Appellants. The Appellants have contended that the documents do not bear the name of factory and it is not written that commodity packed in bags was cement. I have perused these loose slips and found that the said slips carry neither the name of Company nor the description of goods. No doubt these slips have been resumed from the factory premises of the Appellants but that is not sufficient to establish the charge of clandestine manufacture and clearance of goods. I find that many names had been mentioned in the said loose slips. However statement of none of these persons had been brought on record to establish the fact that the said slips pertained to the Appellants and reflected the transactions in bags of cement effected by both Appellants 1 and 2. It is well settled that the charge of clandestine manufacture and clearance of goods is a very serious charges and is required to be proved beyond doubt. It has been held by Courts and the Tribunal that suspicion however strong cannot be a substitute for evidence. Department has not adduced any corroborative evidence to support the charge of clandestine manufacture and removal of goods. The Adjudicating authority has drawn inferences from the recovery of the slips without any independent material that since the slips had been recovered from the factory premises these relate to cement bags only. The presumption made by the learned Commissioner is not supported by any independent material on record. It has been mentioned in the impugned Order that the sheets were signed by workers of the factory. However there is no statement of any workers on record to establish the said fact. - Adjudicating authority has himself mentioned in the impugned Order that there are references of truck nos. in the sheets and the investigation with respect to the truck owners/drivers would have been relevant. It is felt that as the investigation has not been conducted from the truck owners/drivers the said sheets do not establish conclusively that the Appellants had manufactured and removed alleged bags of cement clandestinely. The Adjudicating authority has presumed without any basis that the statements of the truck owners/drivers would have had a corroborative value for the Department s case and not the Assessee. This presumption could not replace evidence to properly corroborate the clandestine activity. It is settled legal position that the demand cannot be worked on the basis of mere meter readings or power consumption. The demand has been computed on the basis of formula of 45 bags production per unit consumption of power. I find that there is no reference in the impugned show cause notice and the Adjudication Order about any specific study undertaken in this regard. No technical basis of such calculation has been arrived at. The charge of clandestine activities is required to be corroborated by production of independent evidences. In the present case no evidence is record to show the receipt of raw materials and removal of finished goods and details of transportation with truck numbers. - clandestine manufacture and clearance of cement based on generator reading have not been uphold. Penalty is imposed on Mr. B.P. Aggarwal partner of M/s. Portland Chemicals and Mr. S.P. Aggarwal Director of the Portland Cement (India) Limited and partner of M/s. Portland Chemical are set aside. - Decided Partly in favour of assessee.

Summary

Issues Involved:
1. Demand of Central Excise duty based on loose papers and DG set meter readings.
2. Confiscation and seizure of cement bags and empty bags.
3. Imposition of penalties on the appellants and their directors/partners.

Detailed Analysis:

1. Demand of Central Excise Duty Based on Loose Papers and DG Set Meter Readings:
The Central Excise Officers detained 1210 bags of cement and certain records, including loose papers, from the appellants' premises. The demand of duty Rs. 1,89,280/- was based on these loose papers, and Rs. 19,77,133/- was based on the meter readings of DG sets. The learned Advocate argued that there was no evidence of clandestine clearance and the entire case was based on presumptions. The loose sheets did not bear the name of the company, factory, or commodity, and could not be presumed to pertain to the appellants. The Tribunal held that the charge of clandestine manufacture and clearance of goods must be proved beyond doubt and not merely on suspicion. The department failed to provide corroborative evidence such as statements from the persons named in the slips, truck owners/drivers, or any records of receipt of raw materials and removal of finished goods. Consequently, the demand of Rs. 19,77,133/- from M/s Portland Cement (I) Ltd and Rs. 1,89,280/- from M/s Portland Chemicals was dropped.

2. Confiscation and Seizure of Cement Bags and Empty Bags:
The Commissioner confiscated 1210 bags of cement and 1962 empty bags. The learned Advocate argued that the 369 bags in Appellant No.1's factory could not be entered in RG-1 due to the absence of the dealing clerk, and the 841 bags found at M/s Portland Chemicals were trial production. The Tribunal found no valid reason for the seizure of empty bags, as no intention was shown that these bags were to be used for packing clandestinely manufactured cement. Thus, the seizure/confiscation of empty bags and the imposed redemption fine were set aside. However, the Tribunal upheld the confiscation and redemption fine for the 1210 bags of cement as the entries in RG-1 were not made, and the circumstantial evidence indicated an intention to remove the goods without payment of duty.

3. Imposition of Penalties on the Appellants and Their Directors/Partners:
Penalties were imposed on the appellants and their directors/partners under Rule 209A of the Central Excise Rules, 1944. The learned Advocate contended that penalties were not imposable as no duty was demandable. The Tribunal set aside the penalties on the directors/partners, finding that the department had not conclusively proved the clandestine manufacture and clearance. The Tribunal emphasized that deeper investigations into the movements of trucks used for the alleged unaccounted cement could have provided irrefutable evidence.

Conclusion:
The appeals were partly allowed. The demand of duty based on loose papers and DG set meter readings was dropped due to lack of corroborative evidence. The seizure of empty bags and the associated redemption fine were set aside. However, the confiscation and redemption fine for the 1210 bags of cement were upheld. Penalties on the directors/partners were set aside due to the failure to conclusively prove clandestine activities.