2018 (2) TMI 810 - AT - Central Excise

Clandestine manufacture and removal - Glazed vitrified Tiles - excesses and shortage of stock - case is mainly based on statements, which remins uncontroverted - Held that - All these statements remain uncontroverted and the Appellant at no point of time has requested for cross-examination of these evidences. Besides, from the statement of the Director, it is concluded by the authorities below that M/s Labh Traders was a fictitious firm and created only for the purpose of clearance of vitrified tiles by the Appellant without payment of duty to various traders. On the issue of confiscation of excess quantity of 22,453 boxes of glazed vitrified tiles seized during the course of visit to the factory of the Appellant, the ld. Commissioner (Appeals) observed that even though the Director Shri Chetan K. Patel in his statement furnishing explanation on the excess stock submitted that approximately 10,000 boxes were in semi-finished condition and not reached at RG-1 stage, and certain quantity of tiles were rejected and returned by their customers, however failed to furnish any evidence in this regard before the authorities. Hence, the explanation furnished by the Director of the Appellant was not accepted and confiscation was directed. Considering the circumstances, shortage in the stock, clearance of the of vitrified tiles cleared clandestinely and seizure of the certain quantity of goods in the premises of the buyers, it can safely be inferred that excess quantity of Vitrified Tiles found in packed in boxes was not in semi finished condition but was kept to be cleared without payment of duty, hence liable for confiscation. Penalty on Director - Held that - the authorities below had observed that the entire activity of manufacture and clearance of goods was carried out at the behest of Director and hence, the Director is liable to be subjected to personal penalty. Appeal dismissed - decided against appellant.

Summary

Issues: Alleged clandestine clearance of goods without payment of duty, dispute over duty demand, existence of fictitious firm, liability of director for penalty

Issue 1: Alleged Clandestine Clearance of Goods without Payment of Duty
The case involved the discovery of excess stock of Glazed Vitrified Tiles during a factory visit, leading to allegations of clandestine clearance without duty payment. The Appellant admitted to shortages and paid duty on the same day. Further investigations revealed goods cleared without duty at a customer's premises, leading to a show cause notice for duty demand, penalty, and confiscation. The Appellant disputed the allegations, arguing lack of evidence and proper verification. The Revenue contended that the clearance was done through a fictitious firm, M/s Labh Traders, and statements of involved individuals supported the allegations. The Tribunal upheld the duty demand and penalty, citing admissions and lack of evidence to refute the claims.

Issue 2: Dispute Over Duty Demand
The Appellant disputed a portion of the duty demand, particularly related to goods cleared under certain transport documents where M/s Labh Traders was mentioned as the consignor. The Commissioner (Appeals) confirmed the amount, noting the admission by the Appellant's authorized signatory and lack of retraction. The Tribunal found no discrepancy in this decision, emphasizing the failure to clarify the presence of transport documents with M/s Labh Traders as the consignor. The Appellant's attempt to challenge this decision was deemed insufficient. The Tribunal analyzed buyer statements and upheld the duty demand, highlighting the creation of a fictitious firm for illicit clearances.

Issue 3: Existence of Fictitious Firm
The Tribunal extensively analyzed the evidence regarding the fictitious firm, M/s Labh Traders, used for the alleged clandestine clearances. Statements from buyers confirmed purchases made through the Appellant's representatives under the guise of M/s Labh Traders. The Tribunal emphasized the uncontroverted nature of these statements and the lack of cross-examination requested by the Appellant. The Tribunal concluded that M/s Labh Traders was fictitious and created solely for evading duty payments, supporting the duty demand and penalty imposition.

Issue 4: Liability of Director for Penalty
The Tribunal addressed the imposition of personal penalty on the Director, attributing the clandestine activities to his oversight. The Director's involvement in day-to-day operations and admissions regarding clearance without duty payment led to the penalty imposition. The Tribunal upheld this decision, stating that the Director's role in the illicit activities warranted personal liability. The lack of evidence to support explanations for excess stock and the overall circumstances led to the confirmation of penalties and confiscation. The Tribunal dismissed the Appeals, upholding the impugned order and penalties imposed on the Appellant.