2017 (6) TMI 1022 - AT - Central Excise

Clandestine manufacture and removal - Held that - When the appellants made categorical assertion regarding their production capacity, and submitted whatever records in their possession, it is for the Revenue to support the case of possible production in excess of accounted quantity by the appellant. The appellant will not be able to prove non-production, apart from stating that they have no capacity to produce such huge quantity. Power consumption - Held that - no specific finding was recorded - general observation cannot be considered as analysis of evidence to support the case of clandestine manufacture and clearance. The two lotus note books formed important basis for allegation of clandestine manufacture. It is clear that the author of entries made in the note book was not identified - such basis cannot be relied upon to upheld demand. Quantification of demand - Held that - it is not clear that what type of co-relation between accounted clearance and the proper records and also how the overall duty liability has been arrived at. No chart or calculation is given in the notice. We also perused photocopies of entries in the note books which were relied upon by the Revenue. It is not clear as to how the entries are co-related to arrive at tangible evidence regarding clandestine manufacture and clearance. On careful consideration of the impugned order and the various submissions made by the appellant, we conclude that the case of the Revenue is not supported by cogent, tangible and credible evidence, to support the allegation of unaccounted clearance. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Central Excise duty demand and penalties imposed on the appellant.
2. Capacity of production of the appellant.
3. Authenticity of recovered note books and witness statements.
4. Coercion in the proprietor's statement and its retraction.
5. Lack of corroborative evidence for unaccounted manufacture.
6. Allegation of trading branded goods from another company.
7. Absence of evidence for additional purchases, transport, and financial details.
8. Lack of clarity in duty demand calculation and evidence provided.

Analysis:
1. The appeal challenged an order demanding Central Excise duty of ?37,13,374 and penalties imposed by the Commissioner of Central Excise, New Delhi, on the appellant, a manufacturer of Super Enamelled Copper Binding Wire. The Tribunal remanded the case for de novo adjudication twice, leading to the final order dated 27.10.2009 confirming a duty demand of ?31,47,253 and equal penalties under Section 11AC of the Central Excise Act, 1944.

2. The appellant contested the case on various grounds, including the capacity to manufacture the quantity of final products within a short period, questioning the authenticity of recovered note books, coercion in the proprietor's statement, lack of corroborative evidence for unaccounted manufacture, and the allegation of trading branded goods from another company. The Tribunal noted that specific findings on these issues were lacking in the impugned order.

3. The Tribunal highlighted the lack of specific findings on the appellant's production capacity and power consumption during the relevant period. The observations made by the original authority were deemed insufficient to support the case of clandestine manufacture and clearance, emphasizing the need for concrete evidence.

4. The recovery of two note books formed a crucial basis for the allegation of clandestine manufacture, but the author of the entries was not identified. Witness statements raised doubts about the location of the note books' recovery, casting suspicion on the evidence presented by the Revenue. The Tribunal found the case unsupported by credible evidence.

5. The Tribunal also addressed the absence of evidence regarding additional purchases, transport details, financial transactions, and the lack of clarity in the duty demand calculation. It concluded that the Revenue's case lacked tangible and credible evidence to substantiate the allegation of unaccounted clearance, leading to the setting aside of the impugned order and allowing the appeal.

6. The judgment, pronounced on 23.06.2017 by the Tribunal, highlighted the insufficiency of evidence and lack of proper findings in the case, ultimately leading to the decision to set aside the impugned order and rule in favor of the appellant.