2015 (10) TMI 2196 - AT - Central Excise

Clandestine removal of inputs and finished goods - Shortage of goods founds - Held that - Shortage of MS scrap is correct as they have been sold by the appellant the scrap in the local market to various individual traders without preparing any bills. With respect to shortage of SS Slabs, it was stated by Shri Mohammed Kaizer, Director, that they have cleared the goods without preparing any bills. On a specific question asked by the investigating officer as to whom the scrap and finished goods were sold, the appellant was not able to give the records for such sale. In the absence of addresses of the persons to whom the scrap and the finished goods were sold, investigating authorities cannot be faulted to carry out further investigation of the buyers. Shortage of raw materials, admitted by the appellant in spite of the fact that certain MS Scrap was under process on the day of visit of the Central Excise officers indicates that the main appellant was in the practice of receiving raw materials unscrupulously and using the same in the manufacture of finished goods removed of clandestinely. Inspite of some MS Scrap in process and lying near the furnace, in his statement the Director of the main appellant did not claim that raw materials in stock was incorrectly taken by the Dept. Officers. The statements taken by the investigators are not retracted. Therefore, taking a stand during appeal proceeding that stock taking of the raw-materials was done incorrectly is not sustainable. So far as duty liability on the clandestinely removed SS Flats is concerned Adjudicating Authority should rework out the duty liability after allowing the benefit of cum-duty benefit and intimate the same to the appellant. After reworking of duty liability with respect to finished SS Plates, main appellant will be eligible to exercise 25% option of reduced penalty, if the duty is paid along with interest and penalty within one month from the receipt of such communication from the Adjudicating Authority. So far as imposition of penalties upon the other appellants is concerned, it is observed that they were involved in the clandestine removal of raw-materials and the finished goods. Therefore, the penalty imposed by the Adjudicating Authority upon the appellants is justified and has been correctly upheld by the first Appellate Authority - Decided partly in favour of assessee.

Summary

Issues:
- Confirmation of demand and penalty under Central Excise Act
- Shortage of MS scrap and SS flats
- Arguments regarding shortage by the main appellant
- Arguments by the Revenue representative
- Admissions by the main appellant's Director
- Benefit of cum-duty price
- Reassessment of duty liability on SS flats
- Imposition of penalties on other appellants
- Final decision on appeals

Confirmation of demand and penalty under Central Excise Act:
The appeal was filed against the confirmation of a demand of Rs. 31,97,437 along with interest and penalty under Rule 25 of the Central Excise Rules 2002. The penalties imposed on the Director and Authorized Signatory of the main appellant were upheld by the first Appellate Authority, leading to further appeals.

Shortage of MS scrap and SS flats:
The central issue revolved around the alleged shortage of 98.411 MT of MS scrap and 252.18 MT of SS flats as indicated by Central Excise officers during a visit. The main appellant argued that these shortages were wrongly calculated and contested the methodology used by the investigating officers.

Arguments regarding shortage by the main appellant:
The main appellant's Advocate argued that the shortages were inaccurately determined, citing discrepancies in the calculation methods used by the department. Reference was made to specific instances where the raw materials were allegedly present on the premises, challenging the basis of the shortage claims.

Arguments by the Revenue representative:
The Revenue representative contended that the shortages indicated clandestine manufacturing and clearance of goods by the appellant. Citing case laws, the representative emphasized the appellant's onus to explain discrepancies and highlighted the significance of comparative statements in such cases.

Admissions by the main appellant's Director:
The Director of the main appellant admitted to shortages and clandestine removal of goods during the investigation. Statements made by the Director regarding the sale of goods without proper documentation further supported the Revenue's case against the appellant.

Benefit of cum-duty price:
The appellant claimed that the benefit of cum-duty price had not been extended to them. The Tribunal acknowledged the requirement to provide this benefit in cases of clandestine removal and directed a reassessment of duty liability on the clandestinely removed SS flats.

Imposition of penalties on other appellants:
Penalties imposed on other appellants involved in the clandestine activities were deemed justified by the Tribunal, upholding the Adjudicating Authority's decision in this regard.

Final decision on appeals:
The main appellant's appeal was partially allowed, subject to the reassessment of duty liability on SS flats. The appeals filed by other appellants were rejected, affirming the penalties imposed on them for their involvement in clandestine activities.

This comprehensive analysis outlines the key legal aspects, arguments presented, admissions made, and the final decision rendered by the Tribunal in the cited judgment.