2024 (11) TMI 126 - HC - Central Excise

Assessment of excise duty - levy of interest and penalty - evidence of manufacture of excisable goods by the appellant - initiation of proceedings based on the registers and loose sheets recovered from the premises of the appellant without corroboration of the manufacture done and the clearance effected of excisable goods - HELD THAT - The two questions of law framed are mixed questions of law and fact. The questions of law were also framed on the ground taken by the assessee that there was no evidence regarding the manufacture of excisable goods by the appellant and the proceedings were based only on registers and loose sheets which cannot lead to imposition of penalty without anything substantiating manufacture. The allegation against the imposition of penalty is that there is no evidence to establish manufacture and clearance of manufactured goods without payment of excise duty - the imposition of penalty was not on account of the allegation of clearance of excisable goods without payment of duty alone as was noticed in the narration of facts. There was excess stock found on verification, there was excess raw materials found to have been consigned to the appellant in two trucks which were examined by the inspection team at the premises of the appellant; on which examination and proper weighment done, presence of raw material in excess of that declared in the invoice was found. In addition to this was the allegation of manufacture based on the documents recovered from the premises of the appellant on inspection. Insofar as the excess of 3.280 Metric Tonnes of Forged Steel Grinding Media Balls; the same was detected on proper stock verification conducted in the presence of two employees of the appellant. The stock verification report was the basis of the allegation so levelled of excess stock found - With respect to the clearance of excisable goods without payment of duty, the records recovered from the premises of the appellant on inspection was relied on specifically in paragraph no. 10 of the show cause notice. The calculation chart was also annexed as Annexure-XXI along with the show cause notice. Brims Products 2008 (9) TMI 603 - PATNA HIGH COURT was a case in which some loose papers were recovered from the dustbin of the premises of the manufacturer. It was found that the manufacturer assessee had received some consignments of betel-nuts which were not entered in the stock register maintained; specifically four numbers of consignments. A clean chit was given to the assessee with respect to two consignments finding no actual purchase having been made by the manufacturer of the raw materials - The investigation was confined to the transporters of the consignments and there could be no presumption drawn of a manufacture and removal of the final product. Even if it is assumed that some raw materials were received at the factory of the respondent, the same cannot be a conclusive proof of production and clandestine sale to different parties was the finding recorded. Due to lack of paucity of evidence benefit of doubt was given to the assessee in that case - it is not convincing that the facts apply to the present case. It is already noticed that the proceedings were initiated on three counts (i) the excess stock found on stock verification, (ii) the excess raw material found physically on inspection of two trucks found at the premises of the appellant with raw materials consigned to the appellant supported by invoices drawn in favour of the appellant but revealing far less quantity than that loaded in the vehicles and (iii) the production details as obtained from the registers, note-pads and loose sheets recovered from the premises. It cannot at all be said that there was no evidence indicating production of excisable goods. The registers, note-pads and cash-books maintained by the assessee clearly indicated the production of the finished product far in excess of that revealed in the books of account, as having been cleared after paying excise duty. It is found on facts that there was sufficient evidence to support the allegation of production in excess of that cleared by payment of excise duty. There are absolutely no reason to entertain the appeal, having found the factual premise to have been adjudicated properly by the adjudicating authority and the appellate Tribunal, there are absolutely no reason to interfere with the order passed. The questions of law answered in favour of the Revenue and against the assessee - appeal dismissed.

Summary

Issues:
1. Assessment of excise duty without evidence of manufacture.
2. Initiation of proceedings based on recovered registers and loose sheets.

Analysis:
1. The appellant contended that the assessment of excise duty, interest, and penalty was unjustified as there was no evidence of manufacturing excisable goods. The appellant argued that the proceedings were solely based on loose sheets of papers recovered during an inspection, without concrete proof of goods manufacture. Reference was made to a similar case decided by another Division Bench. The show cause notice also lacked evidence of goods manufacture.

2. The Senior Standing Counsel sought to uphold the Tribunal's order, arguing against interference in fact-finding by the High Court unless substantial legal questions were involved. The appellant, engaged in manufacturing Forged Grinding Media Steel Balls, was inspected, revealing excess finished goods and raw materials. The inspection team seized various records, registers, and loose sheets indicating production exceeding recorded levels, leading to penalty imposition.

3. The questions of law raised were whether the penalty imposition was supported by evidence of goods manufacture and clearance without excise duty payment. The show cause notice and recovered documents were examined, revealing excess stock and raw materials, discrepancies in consignment quantities, and evidence of manufacturing activities.

4. The Tribunal found evidence in registers, note-pads, and cash-books recovered from the appellant's premises, detailing production activities, raw material receipts, and production quantities. The documents were initialed by authorized personnel, corroborating production figures. Loose sheets also disclosed raw material receipts and production details consistent with other records.

5. A previous case involving clandestine manufacture lacked conclusive evidence, leading to the benefit of doubt for the assessee. In contrast, the present case had evidence supporting the allegation of production exceeding cleared quantities. The Tribunal's decision was upheld, finding no reason to interfere with the order passed, and ruling in favor of the Revenue against the appellant.

6. The appeal was rejected, and any interlocutory applications were disposed of accordingly. The judgment emphasized the importance of evidence in establishing excise duty liabilities and upheld the penalty imposition based on recovered documents and inspection findings.