2015 (6) TMI 952 - AT - Central Excise

Waiver of pre deposit - Evasion of duty - Clandestine removal of goods - Penalty u/s 11AC - Held that - It is a case, where the investigation recovered various chits containing entries directly demonstrating clearances of the goods manufactured by the appellant. That brought out the appellants as well as the buyer of such goods to levy. The buyer did not rule out appellant s involvement in the unaccounted clearances. They became witness against appellant by virtue of their dealing with such goods of appellant. The appellant also could not bring out any evidence to lead before the investigation as well as the authorities below, to prove that the goods covered by the chits did not belong to it. - chits assigned title to those chits being owned by it and the entries therein self against the appellant. When such cogent evidence surfaced, it is difficult to conclude that the clearances were accounted. It is therefore a clear case to hold that the goods were removed clandestinely and cleared without payment of duty. - Stay denied.

Summary

Issues:
1. Allegation of evasion of duty and penalty under Section 11AC of the Central Excise Act, 1944.
2. Involvement of Directors in the evasion of duty.
3. Reduction of penalty under Section 11AC for the appellant.

Analysis:

Issue 1: Allegation of evasion of duty and penalty under Section 11AC
The appellant vehemently opposed the adjudication, arguing that duty evasion cannot be presumed merely based on allegations of clandestine removal. They contended that duty should not be automatically levied, and penalty under Section 11AC should not apply. The Directors of the appellant-Company faced penalties, which the appellant argued were unjust since no incriminating documents implicating them were found during the investigation. The appellant also cited financial difficulties, stating that any pre-deposit direction would cause financial hardship.

Issue 2: Involvement of Directors in the evasion of duty
The investigation revealed various chits containing entries that directly indicated clearances of goods manufactured by the appellant. These entries pointed to the involvement of both the appellants and the buyers of the goods in question. The buyers did not deny the appellant's involvement in unaccounted clearances, serving as witnesses against the appellant. Despite the lack of evidence disproving ownership of the goods covered by the chits, the possession of these chits by the appellants implied their ownership, leading to legal consequences. Consequently, the Tribunal found the appellants liable for clandestine removal of goods and dismissed their appeal.

Issue 3: Reduction of penalty under Section 11AC for the appellant
The appellant sought a reduction in the penalty imposed under Section 11AC, suggesting it be lowered to 25% of the duty element. However, the Tribunal noted that such concession is permissible under Section 11A(2) for cases of short-levy, short-paid, or erroneous refund within one year from the relevant date, provided the appellant demonstrates clean hands in determining the actual liability. Since the manufacturer appellant did not fully discharge the duty, leniency under the first proviso to Section 11A was not applicable. Therefore, the Tribunal dismissed the appeal and upheld the penalty imposed on the appellant.

In conclusion, the Tribunal dismissed all three stay applications and appeals, upholding the penalties imposed on the Directors and the appellant under Section 11AC of the Central Excise Act, 1944.