2024 (12) TMI 10 - AT - Central Excise

Clandestine manufacture and removal - alleged fraudulent availment of cenvat credit on the strength of invoices issued by their Unit-II located at Coimbatore without actually receiving the goods - levy of penalty on the appellants - HELD THAT - The appellant s factory was visited on 14.09.2005 on the basis of intelligence about indulgence in clandestine manufacture and clearance of electrical stampings and parts of motors and also fraudulent availment of cenvat credit on invoices without receiving the inputs. Voluminous records have been seized during the search operation and subsequently statements of various persons including the employees of the appellant have been recorded. The evidences that have been brought on record revealed that the appellant has indulged in clandestine manufacture and clearance of the excisable goods without payment of duty; also in the truck load cleared excess quantity of goods than the quantity mentioned in the invoices for clearance. The argument of the appellant that only on the basis of these statements and without any corroborative evidence from the suppliers of raw materials consumption of electricity purchaser of the goods since not investigated and brought on record the confirmation of the demands and recovery of cenvat credit alleging fraudulent availment cannot be sustained. Similar arguments have been raised by the appellant before the Special Court for Economic Offences at Bangalore which has been dealt at length and ultimately the Court analysing the evidences and statements of witnesses called for who were subjected to examination-in-chief and cross-examination and also referring to various documentary evidences placed before the Court by the prosecution and taken on record arrived at the conclusion that there had been manufacture and clandestine clearance of excisable goods and consequently convicted all the accused who are appellants. The requirement of evidence to prove a case in a criminal case is more rigorous than in comparison to confirmation of demand by the adjudicating authority on the principle of preponderance of probability. In the present case on a trial to criminal liability the Court has arrived at the conclusion that there has been evidence of clandestine manufacture and clearance of the goods and fraudulent availment of cenvat credit which rests on the evidences and the witnesses who have admitted before the Court in addition to their admission before the authorities which have been recorded under Section 14 of the Central Excise Act 1944. The argument of the learned advocate disputing the said evidences cannot be acceptable. Further it is found that the learned Commissioner analysing the records recorded a detailed finding which corroborates the statements furnished by the witnesses. Therefore the contention of the appellant that allegation of clandestine clearance of goods cannot be sustained is also devoid of merit. The confirmation of demand of duty on goods manufactured and cleared clandestinely amounting to Rs.27, 46, 833/- confirmed in the impugned order with interest and equivalent penalty under Section 11AC of the Central Excise Act 1944 is upheld. Also wrong availment of cenvat credit of Rs.2, 72, 388/- only on the basis of invoices without receipt of inputs confirmed in the impugned order with interest and equivalent penalty under Rule 15(2) of Cenvat Credit Rules 2004 read with Section 11AC of Central Excise Act 1944 is upheld. The penalty imposed on the other appellants viz. Mr. G.R. Govindarajan Managing Director Mr. S. Rajamannar CEO Mr. R. Rajendran Manager-Accounts and Mr. R.N. Ramesh In-charge of Despatches under Rule 26 of the Central Excise Rules 2002 is upheld but reduced to Rs.25, 000/- each in respect of Mr. G.R. Govindarajan Managing Director Mr. S. Rajamannar CEO; to Rs.5000/- each in respect of Mr. R. Rajendran Manager-Accounts and Mr. R.N. Ramesh In-charge of Despatches. Similarly the penalty imposed under Section 26 of Central Excise Rules 2002 on M/s. Raaja Magnetics (RML-II) Coimbatore is reduced to Rs.25, 000/- to meet the ends of justice. Penalty imposed under other provisions on all appellants are set aside. The impugned order is modified to the above extent - the appeals filed by the appellants are disposed of.

Summary

Issues Involved:

1. Clandestine manufacture and removal of goods without payment of duty amounting to Rs.27,46,833/-.
2. Fraudulent availment of CENVAT credit of Rs.2,72,388/- without receipt of inputs.
3. Imposition of penalty on the appellants.

Issue-Wise Detailed Analysis:

1. Clandestine Manufacture and Removal:

The case involved the appellant's alleged clandestine manufacture and removal of electrical stampings and parts of motors without payment of duty. The investigation was initiated based on intelligence reports, leading to searches and seizure of records from the appellant's premises. The Department alleged that the appellant had removed goods without invoices, in excess of invoice quantities, and without paying the requisite duty. The Tribunal noted that the evidences, including dispatch registers and lorry receipts, supported the Department's claims. These records showed discrepancies between the quantities mentioned in statutory records and those in private records. Statements from employees corroborated the findings, with no retraction of admissions. The Tribunal upheld the demand of Rs.27,46,833/- for clandestine removal, emphasizing that the criminal trial had already established these facts beyond reasonable doubt, a standard more rigorous than the departmental adjudication based on the preponderance of probability.

2. Fraudulent Availment of CENVAT Credit:

The appellant was accused of fraudulently availing CENVAT credit based on invoices without actual receipt of inputs. The Tribunal found that the appellant had issued invoices to facilitate credit availment without corresponding movement of goods. The investigation revealed that goods were allegedly delivered directly to the appellant's unit, with invoices obtained separately. This was misconstrued as non-receipt of inputs. The Tribunal upheld the demand of Rs.2,72,388/- for wrong availment of CENVAT credit, noting that the appellant's arguments were not substantiated by evidence and that the criminal court had already confirmed these findings.

3. Imposition of Penalty:

Penalties were imposed on the appellant company and its officers under relevant provisions of the Central Excise Rules and CENVAT Credit Rules. The Tribunal upheld these penalties, noting that the criminal proceedings had concluded with penalties imposed on the appellants, which they had accepted and paid. However, the Tribunal modified the penalties, reducing them for certain individuals to Rs.25,000/- and Rs.5,000/- respectively, to meet the ends of justice. Penalties under other provisions were set aside.

In conclusion, the Tribunal upheld the impugned order with modifications, confirming the demands and penalties related to clandestine manufacture, removal of goods, and fraudulent CENVAT credit availment. The appeals were disposed of with the order pronounced in open court.