2019 (8) TMI 872 - AT - Central Excise

Clandestine Removal - demand based on loose slips and scribbling pads recovered from the premises of the appellants - main case of the department is based on assumptions and presumptions and not corroborated with evidences - HELD THAT - The entire case is made on evidence contained in the slips/documents recovered from the appellant or the third parties. We find that learned Commissioner has given detailed findings on going through the File No. 61 and 62 (notebook). The findings of the Commissioner are contained in paras 45 to 74 of the impugned order. We find that learned Commissioner has analysed the evidence available to come to the conclusion on the quantity of evasion alleged to have been made by the appellants - Learned Commissioner however confirmed the demand for the period February to March 2003 along with a period August 2004 to September 2004 for the reason that the scribblings are under the name of Shri. Muthu and a payment voucher was recovered containing the signature of the payer and the payee. This is but one example to show that learned Commissioner has been meticulous in scrutiny of the documents and arriving at the quantity alleged to have been removed clandestinely. Slips maintained by a specific person performing a specific duty for which he is paid cannot be brushed aside simply for the reason they are not singed/authenticated. These are not like the scribblings of a school kid who notes down something whenever he is not interested in the class. Therefore, we find that they have evidentiary value as long as they are recovered from the persons/premises of the appellants or from the persons/premises with whom they have transaction. We find that learned Commissioner has rightly held that it is sufficient to prove that the default in compliance has occurred; no evader of tax leaves all evidences to prove his guilt and that there are ample evidences to prove the malfeasance of the assessee. Retraction of statements - HELD THAT - The retraction of the statement by Shri. Latheef at a later date has no relevance. Similarly, as the evidences albeit in bits and pieces corroborate the clandestine removals of the appellants, we find that non-recording of statements of Shri. Muthu or Shri. Sagidas does not vitiate the proceedings. As these are employees/contractors of the appellants their cross-examination would have not served any further purpose as there is every chance that they may be tutored at a later date by their employer. As there was sufficient evidence as discussed by the Commissioner, the above infirmities do not come in a way of the conclusions drawn. Time Limitation - HELD THAT - As observed by the learned Commissioner, the duty evasion resorted to by the appellants could only be unearthed after investigation of DGCEI. Therefore, extended period in terms of proviso to Section 11A is attracted. We remand the case back to the original authority for computing the quantity alleged to have been clandestinely removed after taking into account the actual quantity already accounted for by the appellants as per their submissions mentioned in Para 4.8 above. The appellants are directed to submit all the evidence, to prove the actual quantity accounted by them and the quantity received by them on job-work/conversion basis from others, within four weeks of receipt of this order - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Alleged clandestine removal of goods.
2. Basis of evidence (scribbling slips, notebooks, statements).
3. Non-accountal of raw materials and production.
4. Production capacity and electricity consumption.
5. Penalties imposed on directors.
6. Time-barred issue.
7. Quantification of clandestinely removed goods.

Detailed Analysis:

1. Alleged Clandestine Removal of Goods:
The appellants were accused of clandestinely manufacturing and clearing 12,568.495 MT of products without paying duty, based on scribbling notebooks, slips, and personnel statements. The Commissioner confirmed a duty of ?1,98,71,454/- along with interest and equal penalty, and imposed penalties of ?10 lakh each on the Managing Director and Executive Director. The department also appealed against the dropping of certain demands.

2. Basis of Evidence:
The appellants argued that the department's case was based on assumptions and uncorroborated evidence, primarily loose slips and scribbling pads, whose veracity was questionable. They cited several precedents to support their contention that clandestine removal must be proven by multiple factors such as stock verification, raw material consumption, electricity usage, actual removal, payments, and transportation.

3. Non-Accountal of Raw Materials and Production:
The Commissioner’s findings on non-accountal of MS ingots/billets were challenged by the appellants, who argued that the documents did not refer to them and the quantities recorded were incorrect. They also contested the department's claims regarding their production capacity and electricity consumption, stating that these varied based on several factors.

4. Production Capacity and Electricity Consumption:
The department relied on statements indicating the appellants' capability for higher production and erratic electricity consumption to suggest clandestine removal. However, the appellants contended that production capacity and power consumption depend on various factors and cannot alone substantiate clandestine removal.

5. Penalties Imposed on Directors:
The Commissioner imposed penalties on the Managing Director and Executive Director under Rule 26 of Central Excise Rules, 2004, citing their involvement in the alleged clandestine removal. However, the Tribunal decided to reduce the penalties considering the prolonged litigation and the substantial portion of the demand already dropped.

6. Time-Barred Issue:
The appellants argued that the issue was time-barred. However, the Commissioner and the Tribunal found that the extended period under proviso to Section 11A was applicable due to the evasion being unearthed only after a DGCEI investigation.

7. Quantification of Clandestinely Removed Goods:
The appellants contended that the Commissioner did not account for goods produced on a job-work basis and actual quantities accounted for. The Tribunal found merit in this contention and remanded the case back to the original authority for re-quantification, directing the appellants to submit evidence within four weeks.

Conclusion:
The Tribunal upheld the charge of clandestine removal but remanded the case for re-quantification of the clandestinely removed quantity, considering the appellants' submissions. The department's appeal was dismissed, and penalties on the directors were reduced to ?5 lakhs each.