2015 (10) TMI 1291 - AT - Central Excise

Duty demand - Clandestine Clearance of goods - Held that - Appellant has not been able to substantiate their pleading and the argument that they did not manufacture the subject goods mentioned during the period from November 2003 to January 2004 which have been called as the difference between RG-I Register and private production register . When there has not been any evidence of payment of duty for the said quantity of goods and there could not be any possibility of such evidence also, when there are no entries in the RG-I register for such quantities of goods produced, then certainly it is the liability of the appellant to make the payment of duty of central excise under the law of Central Excise and make good the loss caused to the National Exchequer in this regard. Case is of peculiar facts wherein department made the audit in November-December 2004 for the manufacturing operations done since November 2003 to December 2004. The activity of the Audit is done post facto operations and is not done simultaneously during the manufacturing activity for the current period. The audit is mainly based on the examination of records though the department has not taken the statement of the manufacturer of the contractor. Therefore, here it is not binding on the Department to produce some extra evidence regarding the difference in quantity of two documents namely private Production Register and the RG-I Register. As the matter concerns with the past production and clearance, the Department can not always find such goods and produce before the adjudication. Private production Register cannot be questioned for the entries made therein when the manufacturer appellant themselves came forward to give explanation about the same through their letter dated 7.1.2005 mentioned above. The manufacturer appellant has not stated that the entries made there are faulty or erroneous. They only have tried to explain through the letter dated 7.1.2005 the difference in the quantities of entries made in the said private register and RG-I register, though it was not found acceptable. - No other option but to confirm the liability of payment of Central Excise Duty along with interest against the appellant for the subject production of the goods except for the production made during the period of November 2003, which has been found to be beyond the time limit of five years from the relevant date under provisions of Section 11 AC of Central Excise Act, 1944 read with the provisions of Section 11AB of the Central Excise Act 1944. - There would be no change in the penalty imposed on the appellant under Rule 25 of Central Excise Rules 2002 - Decided against assessee.

Issues Involved:
1. Allegation of clandestine clearance of HDPE woven sacks/bags.
2. Basis of the department's case and the audit objection.
3. Limitation period for issuing the show-cause notice.
4. Difference between private register and RG-I register entries.
5. Liability of the appellant for Central Excise duty.
6. Requirement for corroborative evidence by the department.
7. Penalty imposed on the appellant.

Detailed Analysis:

1. Allegation of Clandestine Clearance:
The matter revolves around the allegation that the appellant clandestinely cleared HDPE woven sacks/bags without paying the required duty. The department's case is primarily based on an audit objection.

2. Basis of the Department's Case:
The department's case is based on an audit objection. The appellant argued that the difference in production figures between the private register and the RG-I register was due to job work done for other manufacturers. The appellant claimed that the duty for these job-worked goods was the responsibility of the principal manufacturer.

3. Limitation Period for Show-Cause Notice:
The appellant received the show-cause notice on 03.01.2009 for an audit conducted in December-January 2003-04. The appellant argued that the notice was beyond the limitation period, especially for the month of November 2003, which is beyond the five-year period stipulated by Central Excise Law.

4. Difference Between Private Register and RG-I Register:
The appellant claimed that the private register was maintained by their contractor and not by them. The department, however, argued that the appellant failed to explain the difference in quantities between the private register and the RG-I register, indicating clandestine clearance of goods.

5. Liability for Central Excise Duty:
The tribunal found that the appellant could not substantiate their claim that the difference in quantities was due to job work. The job work challans produced did not mention the manufacture of HDPE woven bags/sacks, only the conversion of granules into fabric. Therefore, the appellant was held liable for the duty on the goods, except for the production in November 2003, which was beyond the limitation period.

6. Requirement for Corroborative Evidence:
The appellant argued that the department needed to provide corroborative evidence to support the allegations. The tribunal, however, referred to various case laws indicating that when facts suggest clandestine removal, the department is not required to produce additional evidence. The private register, which the appellant acknowledged, was sufficient to establish the case.

7. Penalty Imposed:
The tribunal confirmed the liability of the appellant for the payment of Central Excise Duty along with interest but excluded the production for November 2003 due to the limitation period. The appellant was also liable for a penalty equivalent to the confirmed duty under Section 11 AC of the Central Excise Act, 1944. However, the penalty could be reduced to 25% if paid within 30 days of notification by the department.

Conclusion:
The tribunal concluded that the appellant failed to provide a credible explanation for the difference in production figures and upheld the department's case of clandestine clearance. The appellant was ordered to pay the duty and interest, with a reduced penalty if paid promptly. The production for November 2003 was excluded from the liability due to the limitation period.

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