2015 (4) TMI 738 - AT - Central Excise

CENVAT Credit - Shortage of goods found - Documents seized from assessee s premises - Held that - Under section 36 A of the Central Excise Act, 1944 where any document is produced by any person or has been seized from the custody or control of any person, under this act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is jointly prosecuted with him, the court shall, unless the contrary is proved by such person, presume the truth of the contents of such documents and admit the document in evidence. In our view, the provisions of section 36A would be applicable in respect of 40 sheets recovered from the factory since, these sheets have admittedly been prepared by Sh. Sunil Mishra and Gopal Gupta, the person working in production department of the appellant company and this fact has been accepted by them. Therefore, if the appellant pleads that the entries in these production sheets do not pertain to the production of the factory on the respective dates, the burden of proving this would be on them for which no evidence has been produced. Though, the appellant plead that Sh. AK Maheshwari had certain grievances against the appellant company and the production sheets had been prepared on his instruction, this plea would not be valid in respect of the production sheets pertaining to June 2003, when Sh. AK Maheshwari was not working with the appellant company. It is only the production recorded in the 40 sheets recovered from the factory premises of the appellant company which can be taken into account for determining the actual production of the appellant company on the respective dates. Accordingly, the duty demand has to be re-quantified based on the 40 production sheets recovered from the appellant company. - since in a number of such sheets there is overlapping of the timings of the shifts, the benefit in this regard has to be given to the appellant - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the production sheets recovered from the factory and residential premises.
2. Allegations of unaccounted manufacture and clandestine clearance.
3. Validity of the duty demand and penalties imposed based on the recovered documents.
4. Applicability of Section 36A of the Central Excise Act, 1944.

Detailed Analysis:

1. Legitimacy of the Production Sheets:
The appellant company contested the legitimacy of the 40 sheets recovered from the factory premises and 19 sheets from the residential premises of the ex-General Manager, Sh. AK Maheshwari. The appellant argued that these sheets were fabricated by Sh. AK Maheshwari due to his disputes with the company. The sheets were allegedly prepared by Sh. Sunil Mishra and Sh. Gopal Gupta under Maheshwari's instructions. However, the Department contended that the sheets were genuine records of production, bearing signatures of the supervisors, and were not fabricated under Maheshwari's pressure, especially since he left the company before June 2003.

2. Allegations of Unaccounted Manufacture and Clandestine Clearance:
The Department alleged that the production recorded in the seized sheets indicated unaccounted manufacture and clandestine clearance of MS Bars, rods, and TORs. The duty involved was initially calculated at Rs. 61,86,420/-, later reduced to Rs. 50,05,014/- due to calculation errors. The appellant argued that their manufacturing capacity did not support the alleged production volumes and highlighted discrepancies in the production sheets, such as overlapping shift timings, to cast doubt on their authenticity.

3. Validity of the Duty Demand and Penalties:
The Commissioner confirmed the duty demand of Rs. 50,05,014/- along with interest and imposed penalties on the appellant company and its Managing Director under Section 11AC and Rule 26 of the Central Excise Rules, respectively. The appellant challenged this, citing the Tribunal's previous order setting aside the duty demand based on alleged shortages and confiscation of cash. The Tribunal found that the only remaining evidence was the production sheets, whose authenticity was in question due to the appellant's grievances against Maheshwari and errors in the sheets.

4. Applicability of Section 36A:
Section 36A of the Central Excise Act, 1944, presumes the truth of documents seized unless proven otherwise. The Tribunal held that this section applied to the 40 sheets recovered from the factory, as they were prepared by employees of the appellant company, and the burden of disproving their contents lay with the appellant. However, Section 36A did not apply to the 19 sheets recovered from Maheshwari's residence, and the Department failed to provide concrete evidence linking these sheets to the appellant company.

Conclusion:
The Tribunal concluded that only the production recorded in the 40 sheets from the factory could be considered for determining the actual production. The duty demand needed re-quantification based on these sheets, giving the appellant the benefit of overlapping shift timings. The impugned order was set aside, and the matter was remanded to the Commissioner for de novo adjudication. Penalties would be proportionate to the re-quantified duty demand. The appeals were disposed of accordingly.