2015 (5) TMI 136 - AT - Central Excise

Shortage of finished goods and raw material - Clandestine removal of goods - Hed that - Authorised signatories of assessee company admitted shortage of the goods and agreed to pay the duty leviable thereon - They also accepted that there is difference in recording of production in two registers, in RG-1 and Daily Progress Report Register. - appellant in their reply to show cause notice retracted the statements. I find that after the visit of the officers, the appellant had accepted the Panchnama in their various statements recorded on various occasions. It is seen that the Panchnama was signed by the Authorised Signatory of the assessee Company who had not disputed preparation and authenticity of the Panchnama at any point of time. Retractions of statement in reply to the show cause notice is not corroborated with any evidence and therefore, such a retraction can not be accepted. So I agree with the findings of the lower authorities that there is no requirement of cross-examination. Shri N.K. Surana in his statement admitted the shortage of the raw materials. It is noted that shortage of raw material for various resins. There is no material available on record that the raw materials were clandestinely removed. The appellant contended that the shortage of raw material was consumed in the finished goods, removed clandestinely and the demand of duty was confirmed. There is no requirement of one-to-one co-relation of input and finished goods in the CENVAT scheme. Hence the demand of duty on the shortage of raw materials used in the manufacture of final product, against which demand of duty raised, is not justified. Director and the Authorised Signatory of the assessee had admitted the authenticity of the register in various statements. They have not disowned this register at any point of time, before filing of the reply to show cause notice. It is already observed stated that retraction of statement in reply to the show cause notice is not corroborated with any evidence and therefore, it can not be accepted in the eye of law. Hence I agree with the findings of the lower authorities in respect of demand of duty in the Daily Progress Report Register. Regarding the imposition of penalty on the Director of the Company, I find that he has stated in his statement that he was not aware of the maintenance of Daily Progress Report Register in their factory. The findings of the lower authorities that the Director was aware of clandestine removal of the goods, is without any basis. Hence, imposition of penalty on the Director of the assessee is not proper. Having considered the peculiar facts and circumstances of the case, I find that it is not a fit case for confiscation of plant and machinery and raw materials, and imposition of redemption fine is not warranted. - Decided partly in favour of assessee.

Issues Involved:
1. Shortage of finished goods and raw materials.
2. Demand of duty based on Daily Progress Report Register.
3. Denial of cross-examination of Panchas.
4. Retraction of statements by the Director and Authorised Signatory.
5. Imposition of penalty and confiscation of plant and machinery.
6. Invocation of extended period of limitation.

Issue-wise Detailed Analysis:

1. Shortage of finished goods and raw materials:
The Central Excise officers detected a shortage of finished goods and various cenvatable inputs during a stock verification at the assessee's factory on 14.11.1997. The shortage involved Central Excise duty amounting to Rs. 3,62,346/- and CENVAT credit amounting to Rs. 4,44,068/-. The assessee's representatives admitted to the shortage and the illicit removal of goods without preparing Central Excise invoices or paying duty. The Commissioner (Appeals) set aside the demand of duty on the shortage of finished goods, but the Tribunal found that the shortage of raw materials was clandestinely removed and upheld the demand of duty on finished goods.

2. Demand of duty based on Daily Progress Report Register:
The demand of duty was also based on discrepancies between the Daily Progress Report Register and the RG-1 register. The Director and the Authorised Signatory of the assessee admitted the authenticity of the Daily Progress Report Register in their statements, which was corroborated by other evidence. The Tribunal upheld the demand of duty based on the Daily Progress Report Register, rejecting the assessee's argument that the employee who maintained the register was not examined.

3. Denial of cross-examination of Panchas:
The Tribunal noted that the retraction of statements by the Director and Authorised Signatory was not corroborated by any evidence. The Panchnama was signed by the Authorised Signatory, who did not dispute its preparation and authenticity. Therefore, the Tribunal concluded that there was no requirement for the cross-examination of the Panchas.

4. Retraction of statements by the Director and Authorised Signatory:
The statements made by the Director and Authorised Signatory admitting to the shortage and clandestine removal of goods were retracted in the reply to the show cause notice. However, the Tribunal found that these retractions were not supported by any evidence and could not be accepted. The Tribunal emphasized that the statements were corroborated by the Panchnama and other evidence.

5. Imposition of penalty and confiscation of plant and machinery:
The adjudicating authority imposed penalties on the assessee and its representatives and confiscated the plant and machinery, imposing a redemption fine. The Commissioner (Appeals) modified the penalties and set aside the confiscation of plant and machinery. The Tribunal upheld the penalties on the assessee but set aside the penalties on the Director, finding no evidence that the Director was aware of the clandestine removal of goods. The Tribunal also found that the confiscation of plant and machinery and the imposition of redemption fine were not warranted.

6. Invocation of extended period of limitation:
The Tribunal found that the extended period of limitation was invokable due to the clandestine removal of goods and the various statements recorded during the investigation. The Tribunal upheld the demand of duty, along with interest and penalties, within the extended period of limitation.

Conclusion:
The Tribunal modified the impugned order by setting aside the demand of duty on the shortage of raw materials while upholding the demand of duty on finished goods and the Daily Progress Report Register. The penalties on the Director and the confiscation of plant and machinery were set aside. The appeals filed by the assessee and the Revenue were disposed of accordingly, and the appeal filed by the Director was allowed.

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