2022 (7) TMI 975 - AT - Central Excise

Clandestine procurement of raw-material, production and clearance of MS ingots and TMT Bars, flats, etc. - demand of duty and penalty on the basis of third party records - HELD THAT - On the basis of incriminating documents seized from the premises of M/s Pankaj Ispat Ltd. and also as per the statement of its Director, Mr. Pankaj Agarwal, revenue segregated the entries relating to this appellant as per private records of Pankaj Ispat, as mentioned in the Annexure A1 A2 to the Show Cause Notice, wherein it appeared that this appellant had purchased rejected moulds from M/s PIL and have also sold Ingots, without accounting for the same in their records regarding purchase, sales, production etc., they have also sold ingots. The statement of Manager of appellant Mr. V.N. Mishra was recorded during investigation, who inter alia stated that he looks after the work relating to sales, accounting etc. during 2010-11 and 2011- 12 and also purchased/rejected moulds from PIL. It is further evident from the Show Cause Notice that neither M/s Pankaj Ispat Ltd. nor its director, Mr. Pankaj Agarwal has been made co-noticee. Thus, it is found that the show cause notice is bad for non joinder of necessary party. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether demand of duty and penalty rightly made based on third party records.

Analysis:
The appeal dealt with the issue of whether the demand of duty and penalty on the appellant, a manufacturer of MS ingots, was justified based on third party records. The case arose from specific information indicating clandestine activities by another company, M/s. Pankaj Ispat Ltd. (PIL), involving procurement, production, and clearance of MS ingots and other goods. Central Excise Officers conducted inspections and found discrepancies in stock, leading to the recovery of incriminating documents. Statements from PIL's Director and further investigations revealed evasion of Central Excise Duty by suppliers of raw material and customers of finished goods. The revenue then linked the appellant to PIL based on seized documents and statements, alleging unaccounted transactions involving the purchase and sale of ingots. The appellant's Manager and Director provided statements during the investigation, denying knowledge of certain transactions mentioned in their records. However, the Show Cause Notice failed to include PIL or its Director as co-noticees, leading to a finding of non-joinder of necessary parties.

In conclusion, the Member (Judicial) found the Show Cause Notice deficient due to the absence of PIL or its Director as co-noticees, rendering it invalid. Consequently, the impugned order was set aside, and the appellant was granted consequential benefits as per the law.