2017 (11) TMI 413 - AT - Central Excise

Clandestine manufacture and removal - contravention of provisions of Rules 173C, 173F & 173G (I) read with Rule 53 and Rule 226 of Central Excise Rules 1944 - intent to evade duty - suppression of facts - invalid excise transport documents viz GPI - pre-deposit - seizure of documents and raw materials. Held that - there are sufficient evidences available against the appellant company to sustain the charges of unaccounted manufacturing and clandestine removal of the finished goods, where the duty of Central Excise was not paid - The demand of duty of ₹ 65,89,432.67 has been confirmed by the impugned order based not only on the documentary evidences but also substantiated by various statements of the concerned persons working or associated with the appellant-company recorded before the Superintendent of Central Excise. The activities and the transactions perpetrated by the appellants which are part of the present proceedings are in the nature of unaccounted manufacture and clandestine clearances to evade payment of Central Excise duty and these are definitely in the nature of white collar crimes like smuggling, evasion of taxes/duties of State etc. - the observations of the Hon ble Supreme Court in the case of Collector of Customs, Madras and Others Vs. D. Bhoormull 1974 (4) TMI 33 - SUPREME COURT OF INDIA are rightly applicable to the present facts. Therefore, the appellants cannot be allowed to argue that for all the transactions, there is requirement of making 100% proof available - Revenue has made its case of unaccounted manufacture and clandestine removal to sufficient degree of certainty as discussed above as well as in the impugned order. It is not always required that Revenue must establish unaccounted production and clandestine clearances without payment of Central Excise duty on the part of the appellant with mathematical precision. If there are enough evidences on record as well as the statements of the concerned persons to indicate and infer the existence of facts of unaccounted production and clandestine clearance on the yardstick of preponderance of probability of happening such fact and which comes to the realm of proved fact beyond reasonable doubt there is no need to look for a fact happening with mathematical precision. The appellants have not been able to counter any of the evidences against them available on record and discussed earlier above. When it is so, we sustain the confirmation of the demand of duty of Central Excise of ₹ 65,89,432.67 as done in the impugned order along with the reasons given therein - the quantum of redemption fine and penalties imposed, are reduced. Appeal allowed in part.

Issues Involved:
1. Demand of duty of central excise and imposition of penalties and redemption fines.
2. Allegations of unaccounted manufacture and clandestine removal of goods.
3. Procedural history and delays in adjudication.
4. Appellants' defense and evidentiary requirements.
5. Judicial observations and precedents.
6. Reduction of penalties and redemption fines.
7. Abatement of proceedings due to the death of appellants.

Detailed Analysis:

1. Demand of Duty and Imposition of Penalties and Redemption Fines:
The appellants faced a confirmed demand of central excise duty amounting to ?65,89,432.67, along with redemption fines of ?6,000 and ?25,000, and penalties of ?10,00,000 on M/s. Bharath Plywoods & Timber Products, ?1,00,000 each on two individuals, and ?2,000 on another individual.

2. Allegations of Unaccounted Manufacture and Clandestine Removal:
The case originated from intelligence leading to searches on 22.08.86, which uncovered incriminating documents and excess stock in the factory. The Department alleged that the appellant contravened various Central Excise Rules by manufacturing and clearing goods without proper accounting and payment of duty, thus evading central excise duty. The show-cause notice demanded duty of ?1,09,74,251.80 for the period 1.2.82 to 21.8.86.

3. Procedural History and Delays in Adjudication:
The appeals, filed in 1989, went through multiple procedural stages, including stay orders, extensions for pre-deposit, dismissal for non-compliance, and subsequent restoration. The case experienced significant delays, including a period when appeal records were lost and later reconstructed following directions from the High Court of Kerala.

4. Appellants' Defense and Evidentiary Requirements:
The appellants argued that there was no proof of actual transportation of unaccounted goods, and the Department relied on the Stock Register, which was not a Production Register. They contended the lack of evidence for excess raw material procurement, sale of unaccounted goods, receipt of sale proceeds, and excess electricity usage. They cited various legal precedents to support their defense.

5. Judicial Observations and Precedents:
The Tribunal noted that in cases of unaccounted manufacture and clandestine removal, 100% evidence is not typically available. The Tribunal relied on the principle that the Department need not prove its case with mathematical precision but must establish a degree of probability that a prudent person would believe. The Tribunal referenced the Supreme Court's decision in Collector of Customs, Madras Vs. D. Bhoormull and other relevant case laws, emphasizing that economic offenses like evasion of duties often lack direct evidence due to their clandestine nature.

6. Reduction of Penalties and Redemption Fines:
Considering the financial difficulties faced by the appellant company, the Tribunal reduced the penalties on M/s. Bharath Plywoods & Timber Products from ?10,00,000 to ?25,000 and on Shri A.P.M. Mammootty from ?2,000 to ?1,000. The redemption fines were also reduced from ?6,000 to ?1,000 and from ?25,000 to ?4,000.

7. Abatement of Proceedings Due to Death of Appellants:
The proceedings against two appellants abated due to their deaths. The Tribunal acknowledged the death of Shri Haridas Gordhandas and Shri Arun Kumar Dattani, leading to the abatement of the appeals filed by these individuals.

Conclusion:
The Tribunal upheld the demand of duty and the findings of unaccounted manufacture and clandestine removal. However, it reduced the penalties and redemption fines considering the appellants' financial difficulties. The appeals of the deceased appellants were abated. The decision was pronounced in open court on 01/09/2017.

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