2000 (10) TMI 926 - AT - Central Excise

Summary

Issues Involved:
1. Suppression of production of M.S. Ingots.
2. Removal of M.S. Ingots without statutory records and duty payment.
3. Demand of excise duty.
4. Imposition of penalty on the company and its directors.
5. Confiscation of plant and machinery.
6. Validity and authenticity of evidence presented by the Department.
7. Cross-examination of witnesses and the right to a fair trial.
8. Relevance of power consumption data in determining production capacity.
9. Use of private records and documents in establishing clandestine activities.

Detailed Analysis:

1. Suppression of Production of M.S. Ingots:
The Department alleged that the appellant company suppressed the production of M.S. Ingots based on various documents recovered, including factory gate passes, log sheets, scrap inward reports, production analysis reports, and sale invoices. These documents indicated that the company had produced more ingots than accounted for in statutory records, suggesting suppression of production.

2. Removal of M.S. Ingots without Statutory Records and Duty Payment:
The Department claimed that the company removed M.S. Ingots clandestinely without entering them into statutory records and without paying the required excise duty. The evidence included pink-colored gate passes and parallel log sheets indicating the removal of goods without proper documentation and duty payment.

3. Demand of Excise Duty:
A show cause notice was issued demanding Central Excise duty amounting to Rs. 2,02,10,690 on 15,540.725 MT of ingots under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excise Act. The Commissioner of Central Excise confirmed the demand of Rs. 2,01,87,734 and imposed a penalty of an equal amount on the company.

4. Imposition of Penalty on the Company and its Directors:
Penalties were imposed on the company and its directors under various rules of the Central Excise Rules. The Commissioner imposed a penalty of Rs. 2 lakhs each on the Managing Director and another Director, holding them responsible for the alleged evasion of duty.

5. Confiscation of Plant and Machinery:
The show cause notice also proposed the confiscation of plant and machinery under Rule 173Q of the Central Excise Rules. However, the final judgment did not specifically address the confiscation order.

6. Validity and Authenticity of Evidence Presented by the Department:
The appellants argued that the documents recovered were stolen and fabricated by a former employee, Rajiv Puri, to blackmail the company. They contended that these documents were not recovered in the presence of any company representative and that no independent witnesses were present during the recovery. The Department's reliance on these documents was challenged on the grounds of their authenticity and the lack of corroborative evidence.

7. Cross-Examination of Witnesses and the Right to a Fair Trial:
The appellants requested the cross-examination of Rajiv Puri and other witnesses, which was not allowed by the adjudicating authority. The Commissioner's finding that the advocate for the appellants had agreed that cross-examination would serve no purpose was disputed by the appellants.

8. Relevance of Power Consumption Data in Determining Production Capacity:
The Department used power consumption data to estimate the production capacity of the furnace, claiming that the company could produce 16 to 18 heats per day. The appellants countered this by presenting evidence from independent authorities and engineers, showing that the actual power consumption and production capacity were lower than alleged.

9. Use of Private Records and Documents in Establishing Clandestine Activities:
The Tribunal noted that the Department's case was primarily based on private records and documents whose authenticity was in question. It was held that the Department failed to provide sufficient corroborative evidence, such as statements from suppliers or purchasers, to substantiate the charges of clandestine manufacture and removal of goods.

Conclusion:
The Tribunal concluded that the Department had not substantiated its case of clandestine manufacture and clearance of excisable goods without payment of duty. The evidence presented did not establish a degree of probability sufficient for a prudent person to believe in the existence of the alleged facts. The appeals filed by the appellants were allowed, and the benefit of doubt was given to them.