2019 (7) TMI 1406 - AT - Central Excise

Clandestine removal - shortage of finished goods as well as input - reliability on Section 9 (D) of the Central Excise Act - cross-examination of witnesses - HELD THAT - It was the most logical and practical method of weighment of finished goods namely MS bars and raw material namely, MS Ingots. We find that weight of one bundle of each size of MS bars have been taken from the weigh bridge installed in the factory premises of the appellant and the print out of the weighment slip has also been taken and the quantity of the bundles of each size of MS bar was counted in the presence of Panchas as well as authorized representative of the appellant and thereafter the stock of available finished goods namely MS bars and raw material namely MS Ingots was arrived at by the officers as well as Panchas and the authorized representative of the appellant. The veracity of the Panchnama and the availability of the finished goods as well as the raw material on the date of visit cannot be challenged as an afterthought by the appellant only because each and every MS bar and each and every ingots of raw material was not individually weighed by the visiting officers. The entire proceedings were conducted in a mutually agreed way which was the best possible practical and logical way of weighment. The appellant has failed to contradict the findings of the Panchnama except advancing an argument that since each and every MS bar or each and every MS ingots was not been weighed the shortage of finished goods and raw material by the officers through Panchnama dated 11/12/2008 cannot be relied upon. These arguments of the appellant are not legally tenable - The demand of duty amounting to ₹ 83,57,897/- on finished goods namely MS bars and an amount of ₹ 24,72,672/- on MS ingots found short, has rightly been confirmed by the impugned order-in-original. Demand of central excise duty amounting to ₹ 35,72,980/- on account of fake cash sale by adopting lower assessable value - HELD THAT - Apart from Shri Pramod Gupta, the drivers of trucks or owners of transport vehicles have admitted that no transportation of old, rejected and pitted steel have taken place. Further the appellant did not advance any explanation for clearance of old, rejected and pitted steel at the time of adjudication. The appellants claim that due to closure of the factory certain goods got deteriorated and they have to be cleared on lower price is without any evidence and the claim made by the appellant is devoid of any merit. The statement recorded of the concerned employees of the appellant also endorse the findings and the stand taken by the Department that fresh finished goods were cleared by the appellant by declaring the same as old, reject and pitted steel. The appellants have not produced any cogent explanation to contradict the findings given in the impugned order whereunder the Adjudicating Authority has confirmed the duty of central excise amounting to ₹ 35,72,980/- on this count. Penalty on appellant Shri Shrivats Rathi - HELD THAT - It is a proven fact that certain quantities of the finished goods as well as raw materials were cleared clandestinely from the appellant premises without discharging central excise duty liability. From the statements of the various employees and Shri Shrivats Rathi himself, it comes out that for all the omission and commission, the employees of the appellant were taking directions from Shri Shrivats Rathi (appellant No. 2). We also find from a perusal of the record of the appeals as well as various statements recorded during the course of investigation that the ultimate beneficiary of the pecuniary benefits arising out of the central excise duty evasion, follow to Shri Shrivats Rathi. Thus the provisions of Rule 26 (1) of the Central Excise Rules, 2002 have rightly been invoked and confirmed in the impugned order against Shri Shrivats Rathi - the personal penalty imposed on Shri Shrivats Rathi reduced from ₹ 75 lakhs under Rule 26 (1) of Central Excise Rules, 2002 to ₹ 50 lakhs. Appeal allowed in part.

Issues Involved:
1. Demand of Central Excise Duty for shortage of finished goods.
2. Reversal of Cenvat credit for shortage of raw materials.
3. Demand of Central Excise Duty for suppressed production and excess burning loss.
4. Demand of Central Excise Duty for undervaluation of finished goods.
5. Demand of Central Excise Duty for clearances on parallel invoices.
6. Imposition of penalties under various sections and rules.

Detailed Analysis:

1. Demand of Central Excise Duty for Shortage of Finished Goods:
The Tribunal confirmed the demand of ?83,57,897/- under Section 11A of the Central Excise Act, 1944, for the shortage of 1932.015 M.T. of MS bars found during the Panchnama dated 11/12/2008. The methodology adopted for weighment of the finished goods was agreed upon by the appellant's representative and was deemed practical and scientific. The appellant's argument that the weighment was not accurate was rejected as an afterthought. The Tribunal held that the shortage was correctly determined and the demand was justified.

2. Reversal of Cenvat Credit for Shortage of Raw Materials:
The Tribunal confirmed the reversal of Cenvat credit amounting to ?24,72,672/- for the shortage of 714.480 M.T. of MS Ingots found during the same Panchnama. The methodology for weighment was the same as for the finished goods, and the appellant's objections were similarly dismissed. The reversal was upheld under Section 11A read with Rule 14 of the Cenvat Credit Rules, 2004.

3. Demand of Central Excise Duty for Suppressed Production and Excess Burning Loss:
The Tribunal found that the Department failed to provide concrete evidence to support the claim of excess burning losses and clandestine clearance of 10259.730 M.T. of MS bars. The appellant had provided technical reports indicating that their re-heating furnace was not working optimally, resulting in higher burning losses. The Department did not undertake any exercise to establish actual burning losses or provide evidence of clandestine clearance. Consequently, the demand of ?4,24,70,378/- on this count was dropped.

4. Demand of Central Excise Duty for Undervaluation of Finished Goods:
The Tribunal confirmed the demand of ?35,72,980/- for the clearance of fresh finished goods misdeclared as old, rejected, and pitted steel. The appellant failed to show any record of production and clearance of such goods in their statutory records. Statements from employees and transporters corroborated that no such transportation took place, and the appellant's claim of deteriorated goods was unsupported by evidence. The demand was upheld under Section 11A of the Central Excise Act, 1944.

5. Demand of Central Excise Duty for Clearances on Parallel Invoices:
The Tribunal noted that the demand of ?5,92,419/- for clearances on parallel invoices had already been confirmed in a previous final order. Therefore, this issue was not re-evaluated.

6. Imposition of Penalties:
- The Tribunal reduced the penalty on Shri Shrivats Rathi from ?75 lakhs to ?50 lakhs under Rule 26(1) of the Central Excise Rules, 2002, considering his involvement in the clandestine activities.
- The penalty of ?5,44,01,255/- under Section 11AC was reduced to ?1,19,30,877/- in light of the dropped demand for excess burning losses.
- A penalty of ?24,72,672/- was confirmed under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC for the shortage of raw materials.

Conclusion:
The appeals were allowed to the extent indicated, with certain demands and penalties confirmed, reduced, or dropped based on the evidence and arguments presented. The detailed analysis provided a comprehensive view of the issues and the Tribunal's reasoning in each case.

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