2016 (12) TMI 156 - AT - Central Excise

Imposition of penalty - SSI exemption - clandestine removal - suppression of facts - Held that - only part of the clearances made were accounted in SBI account of the unit. The super stockists/buyers have been making the deposits towards some part of the goods received by them in the KVB account of the Director. Though it is contended by the appellant unit that the said amounts deposited by the super stockists/buyers were withdrawn and deposited in the SBI account of the appellant unit on the same day or next day the argument that this would prove that there were no accounted sales is not tenable or acceptable. The modus-operandi of depositing the sale proceeds in to the KVB account of Director and thereafter re-depositing or transferring the same into the account of appellant unit can only be to cover up the unaccounted clearances. By such practice the SBI account of appellant unit would reflect such amounts as transferred /withdrawn and deposited from KVB account of Director and not as amounts received from clearances of goods. It is crystal clear that this is an effort to cover up the unaccounted sales - there has been unaccounted sales which the appellant has not been able to explain properly. The activity of clandestine clearances having been established I do not find any grounds to interfere with the equal amount of penalty imposed on the appellant unit. The facts and evidences establish that the Director Shri L Danunjaya had a consciouse role in the above activities of unaccounted sales. However the penalty of 40 000/- imposed on the Director is on the higher side. I am of the view that the penalty of 10, 000/- would meet the ends of justice. Penalty of 25, 000/- has been imposed on Sri K.Shivakamini Kumar which in my opinion is unwarranted. The said person is only an employee ie. Finance Manager of the appellant unit. The penalty imposed on Shri Shiva Kamini Kumar is therefore set aside. Appeal disposed off - decided partly in favor of appellant-assessee.

Summary

Issues:
Manufacturers availing SSI Exemption under Notification No 08/2002 C.Ex, discrepancies in maintaining records, diversion of sale proceeds, imposition of penalties under Section 11 AC r/w Rule 25 of Central Excise Rules, 2002, challenge to penalties imposed.

Analysis:
1. The appellants, manufacturers of Ice creams under brand names LAZZA and UNCLE JOHN, availed SSI Exemption until January 2003 when discrepancies were noted by revenue officials. The discrepancies included lack of manual records, non-preservation of invoices, and valuation based on wholesale price instead of MRP.

2. Revenue officials recovered sales documents and bank passbook, alleging diversion of sale proceeds into the Director's savings account for clandestine purposes. A demand of &8377; 11,67,864/- was raised, leading to penalties on the appellant unit and individuals. The Commissioner(Appeals) upheld the demand and penalties, prompting the appeal to the Tribunal.

3. The appellant denied clandestine activities, attributing discrepancies to server failure. The revenue alleged the Director's bank account was used to conceal sales proceeds. However, the appellant argued that all proceeds were eventually deposited in the unit's account, refuting clandestine removal claims.

4. The revenue contended that deposits in the Director's account were unaccounted sales, evidenced by cross-checking with super stockists/buyers. The recovery of sales registers further supported the revenue's claim of unaccounted clearances.

5. The Tribunal observed that only part of clearances were accounted for in the unit's account, with deposits made by super stockists/buyers into the Director's account. This practice aimed to mask unaccounted sales, as evidenced by discrepancies in value declarations exceeding the SSI limit.

6. Citing unexplained unaccounted sales, the Tribunal upheld penalties on the appellant unit and the Director, albeit reducing the Director's penalty. The Finance Manager's penalty was set aside, considering their role as an employee.

7. The Tribunal dismissed one appeal, allowed another, and partly allowed the Director's appeal, emphasizing the established unaccounted sales and justifying the penalties imposed.

In conclusion, the judgment upheld penalties on the appellant unit and Director for unaccounted sales, while adjusting penalties based on individual roles. The decision highlighted the importance of proper record-keeping and compliance with exemption criteria to avoid penalties under Central Excise Rules.