2005 (5) TMI 432 - AT - Central Excise

Adjudication - Remand - Natural justice - Demand - Clandestine removal of processed fabric in guise of calendered fabric

Issues Involved:

1. Confirmation of duty demand and imposition of penalties.
2. Alleged evasion of Central Excise Duty by mis-declaring processed fabrics as calendered fabrics.
3. Adherence to principles of natural justice.
4. Validity and sufficiency of secondary evidence.
5. Reduction of penalties and confiscation orders.

Detailed Analysis:

1. Confirmation of Duty Demand and Imposition of Penalties:

The Commissioner of Central Excise, Mumbai confirmed the demand of duty of Rs. 1,02,71,439/- and Rs. 35,31,655.23 under Section 11A(2) of Central Excise Act, 1944, along with personal penalties of Rs. 1 crore and Rs. 35 lakhs under Rule 173Q(1) of Central Excise Rules, 1944 against M/s. Mira Silk Mills. Additionally, penalties of Rs. 35 lakhs and Rs. 20 lakhs were imposed on Shri S.C. Agarwal under Rule 209A of the Central Excise Rules, 1944. The land, building, plant, machinery, etc., were also confiscated with an option to redeem on payment of a fine of Rs. 15 lakhs in each case.

2. Alleged Evasion of Central Excise Duty:

The case involved M/s. Mira Silk Mills, a proprietary concern engaged in processing man-made fabrics. The factory was inspected by Central Excise Officers, revealing discrepancies between declared and actual electricity consumption, suggesting evasion of duty by mis-declaring processed fabrics as calendered fabrics. Statements from ex-employees corroborated that various machines used in processing man-made fabrics were operational, contradicting the declared calendering process, which consumes less power.

3. Adherence to Principles of Natural Justice:

The appellants argued that the principles of natural justice were violated as original documents were not supplied. However, the Tribunal noted that secondary evidence was permitted, and the Commissioner had complied with Tribunal's directions by certifying and verifying documents from respective officers. Despite multiple opportunities, the appellants did not inspect the records or cross-examine witnesses, indicating non-cooperation.

4. Validity and Sufficiency of Secondary Evidence:

The Tribunal acknowledged that original documents were lost, but secondary evidence, including certified copies of electricity bills and "R" forms, was valid. The Superintending Engineer verified electricity consumption, and the Additional Assessor and Collector (Octroi) certified "R" forms. The appellants did not challenge the consumption details or existence of "R" forms, thus the secondary evidence was deemed sufficient.

5. Reduction of Penalties and Confiscation Orders:

The Tribunal upheld the duty demand but reduced penalties. The penalty for M/s. Mira Silk Mills was reduced from Rs. 1 crore to Rs. 35 lakhs in one appeal and from Rs. 35 lakhs to Rs. 15 lakhs in another. Penalty on Shri S.C. Agarwal was reduced from Rs. 35 lakhs to Rs. 15 lakhs and from Rs. 20 lakhs to Rs. 10 lakhs. The confiscation of plant, machinery, etc., was set aside.

Conclusion:

The Tribunal concluded that the appellants were engaged in clandestine removal of processed fabrics under the guise of calendered fabrics, confirming the duty demand. However, penalties were reduced, and confiscation orders were set aside, emphasizing that the principles of natural justice were adhered to as far as practicable. The appeals were otherwise rejected.

← Previous Next →