2005 (11) TMI 143 - AT - Central Excise

Clandestine removal - Proof of 'Mens Rea' - Show cause notice - Limitation - Evidence for the payment of duty on the inputs - Demand duty - HELD THAT - We find that the Adjudicating Authority has reached his conclusions not only on the basis of the statements of the concerned persons but also the various incriminating records seized. We hold that the statements have been corroborated by the records seized. Even unaccounted raw materials and finished goods have been seized. There is no infirmity in the Adjudication Order. A modus oprendus has been deviced to evade Central Excise duty systematically. Hence, invocation of longer period is sustainable. The levy of penalties on the appellants is justified. The seized goods are liable for confiscation. Hence, the Order of confiscation of the seized finished goods and raw materials is upheld. As per the mandatory penalty u/s 11AC is concerned, we feel that the ends of justice could be met, if the same is limited to 50% of the duty liability. The appellants had pleaded before the adjudicating authority that the Modvat credit benefit should be given to them, as several inputs have suffered duty. The adjudicating authority has denied the same on the ground that the appellants had to fulfill certain statutory requirements before availing Modvat credit. We feel that when the Revenue is demanding duty on the final products, the Modvat benefit should be given provided there is sufficient evidence for the payment of duty on the inputs. Therefore the duty liability has to be recalculated on the basis of the documentary evidence available with the factory during the relevant time for payment of duty on the inputs. The Adjudicating Authority's denial of SSI benefit to the appellants is upheld. Interest u/s 11AB is also upheld. The case is remanded to the original authority to compute the duty liability in terms of the above observations. The confiscation of goods and imposition of redemption fines and adjustment of liability towards currencies seized are upheld. The appeals are disposed of in the above terms.

Issues Involved:
1. Denial of SSI Benefit for the period from 1999 to September 2003.
2. Demand for duty amounting to Rs. 2,83,04,863/- and Rs. 6,39,955/- for specified periods.
3. Imposition of penalties under various sections and rules.
4. Confiscation and redemption fines for seized goods.
5. Demand for interest under Section 11AB.
6. Allegations of procedural lapses and coercion during the investigation.
7. Right to cross-examine witnesses and the validity of statements taken under alleged coercion.

Issue-wise Detailed Analysis:

1. Denial of SSI Benefit for the period from 1999 to September 2003:
The adjudicating authority denied the Small Scale Industry (SSI) benefit to SPCPL for exceeding the turnover limit of Rs. 3 crore each year during the relevant period. This conclusion was based on seized documents and statements from company officials admitting to unaccounted production and removal of goods without payment of duty.

2. Demand for duty amounting to Rs. 2,83,04,863/- and Rs. 6,39,955/- for specified periods:
The adjudicating authority demanded duty for clandestine removal of excisable goods. The appellants argued that the show cause notice was invalid due to the lack of Chief Commissioner's approval, but this was dismissed as the relevant requirement had been omitted by the time the notice was issued. The duty demand was based on seized documents and admissions from company officials.

3. Imposition of penalties under various sections and rules:
Penalties were imposed on SPCPL and its officials under Section 11AC and various rules for clandestine manufacture and removal of goods. The appellants contended that penalties could not be imposed without proof of 'Mens Rea' and that separate penalties under different provisions were unjustified. The tribunal upheld the penalties but limited the mandatory penalty under Section 11AC to 50% of the duty liability.

4. Confiscation and redemption fines for seized goods:
The adjudicating authority ordered the confiscation of seized finished goods and raw materials, imposing redemption fines. The tribunal upheld the confiscation and fines, citing the systematic evasion of duty through clandestine operations.

5. Demand for interest under Section 11AB:
Interest under Section 11AB was demanded on the duty liability. The tribunal upheld this demand, affirming the adjudicating authority's decision.

6. Allegations of procedural lapses and coercion during the investigation:
The appellants claimed that statements were taken under coercion and that there were procedural lapses, including the denial of cross-examination of witnesses. The tribunal found that the adjudicating authority had provided detailed findings and that the statements were corroborated by seized documents. The tribunal also cited case laws supporting the non-violation of natural justice principles in such circumstances.

7. Right to cross-examine witnesses and the validity of statements taken under alleged coercion:
The appellants argued that their right to cross-examine witnesses was denied and that statements were not voluntary. The tribunal found that the adjudicating authority had distinguished the case laws cited by the appellants and had relied on corroborated evidence. The tribunal concluded that the denial of cross-examination did not violate natural justice principles.

Conclusion:
The tribunal upheld the adjudicating authority's findings on clandestine manufacture and removal of goods without payment of duty, the denial of SSI benefit, and the imposition of penalties and interest. The tribunal limited the mandatory penalty under Section 11AC to 50% of the duty liability and remanded the case for recalculating the duty liability, allowing for Modvat credit where applicable. The confiscation of goods and imposition of redemption fines were upheld.

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