2019 (8) TMI 315 - AT - Central Excise

Clandestine Removal of finished goods - MS/SS ingots - allegation based on parallel invoices - reliance placed on statement of Sh. Devki Nandan, weigh bridge incharge of the Appellant, recorded under the provisions of section 14 of Central Excise Act - weighment slips, recovered during the course of search - Valuation of the alleged shortage of stock - imposition of Personal penalty. Alleged shortage of finished goods of 128.435 MT - HELD THAT - There may be a possibility of variation of 10% to 15%, but the shortage cannot be stated to be illusory, as worked out during physical stock taking. The panchnama / mahazar was drawn in front of two independent witnesses who witnessed the physical stock taking. In case of disagreement of the method of stock taking the appellant should have raised objection during the time of stock taking or soon thereafter or within a period of few days (one week), which is not the case - the alleged shortage of finished goods if held to be correct, but there needs to be some allowances say 15%, is given for error or variation, as the stock taking was done in a hurried manner. Parallel invoices - HELD THAT - In the course of verification of the alleged buyers / receiver of the goods before the Commissioner (Appeals), Shri A. K. Malhotra, Director of M/s Rathi Steel Dakshin Limited stated that his statement was taken under pressure. Further, he had already retracted his statement vide letter dated 02.08.2017. the other alleged buyers, were not examined by the Revenue in adjudication proceedings. Demand based on the weighment slips, recovered during the course of search - HELD THAT - The Director of the appellant has given a plausible explanation, that they also weighed the goods of outsiders on their weighbridge and such weighment slips pertain to outsiders material. Such plausible explanations have not been found to be untrue. There is also no proof to establish clearance of goods under the weighment slips whatsoever. Hence, it is held that the demand based on the weighment slips is only presumptive or fictional and not based on any material evidence, and hence the same is set aside. Valuation of the alleged shortage of stock - HELD THAT - It would be appropriate to consider the value mentioned in the alleged parallel invoices. Thus, demand shall be reworked adopting the value mentioned in such invoices - the demand for the quantity alleged to be cleared clandestinely is worked out. The adjudicating authority is directed to calculate the duty payable on this quantity on the basis of the rates of ingots found mentioned in the alleged parallel invoices. Accordingly, the appellant company shall also be entitled to reduced penalty under Section 11AC of the Act. At the same time appellant be entitled to pay 25% of the duty, recalculated. Personal penalty on Shri Anshul Agarwal and Shri Nitish Ranjan - HELD THAT - No case of active concealment and/ or case of clandestine removal is made out against them, under the facts and circumstances. Accordingly, penalty under Rule 26 against both these appellants are set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Alleged clandestine removal of finished goods.
2. Authenticity of stock verification and shortage findings.
3. Validity of parallel invoices.
4. Relevance of weighment slips.
5. Correctness of valuation and penalty imposition.

Detailed Analysis:

1. Alleged Clandestine Removal of Finished Goods:
The primary issue in this appeal was whether the appellant clandestinely removed their finished goods. The investigation revealed a shortage of 128.435 MT of MS Ingots and alleged the clandestine removal of goods based on parallel invoices and weighment slips. The department issued a Show Cause Notice demanding central excise duty for the alleged clandestine removals.

2. Authenticity of Stock Verification and Shortage Findings:
The appellant contested the physical stock verification process, arguing it was conducted in an unrealistically short span of four hours and was influenced by undue pressure. However, the tribunal found that the stock verification was done in the presence of independent witnesses and the appellant's staff. The tribunal acknowledged a possible variation of 10-15% in the stock but held the shortage findings to be generally accurate. Thus, the demand was confirmed for 109 MT after allowing a 15% margin for error.

3. Validity of Parallel Invoices:
The department alleged that the appellant used parallel invoices for clandestine removals, but these invoices were not recovered from the appellant's premises. The tribunal noted that the statements of the alleged buyers were taken under pressure and had been retracted. Since the buyers were not examined during the adjudication proceedings, the tribunal set aside the demand based on parallel invoices.

4. Relevance of Weighment Slips:
Weighment slips recovered during the investigation were used to substantiate the clandestine removal allegations. The appellant explained that the weighment slips pertained to goods of other parties weighed on their weighbridge. The tribunal found this explanation plausible and noted the lack of evidence to establish the clearance of goods under these slips. Consequently, the demand based on weighment slips was deemed presumptive and set aside.

5. Correctness of Valuation and Penalty Imposition:
The tribunal directed the adjudicating authority to rework the demand based on the value mentioned in the alleged parallel invoices for the confirmed quantity of 109 MT. The appellant was entitled to a reduced penalty under Section 11AC of the Act, with the option to pay 25% of the recalculated duty. Personal penalties on the Director and Authorised Signatory were set aside as no active concealment or clandestine removal was proven against them.

Conclusion:
The appeal of M/s RIPL was partially allowed, confirming the demand for 109 MT of MS Ingots after allowing for valuation errors. The appeals of Shri Anshul Agarwal and Shri Nitish Ranjan were fully allowed, setting aside the personal penalties imposed on them.