2011 (7) TMI 188 - AT - Central Excise

Consification - Demand - Penalty under Rule 173Q as well as Section 11 AC - Clandestine removal - shortage of grey fabrics - Find that at the time of officer s visit to the respondent s factory the stock of PV Shirting in the RG-1 Register was shown as 84316 Sq.mtrs. and the entire production of PV Shirting had been shown on 17.08.98 which is impossible more so when the production slips pertaining to the production of PV Shirting on 17.08.1998 totalled only upto 4316 sq.mtrs. from which it is clear that this was the actual production of 17.08.98 which had originally been recorded in the RG-I Register and immediately after the officers visit the same was hurriedly changed to 84316 - Shri Deepak Srivastava Excise Clerk in his statement recorded under Section 14 of the Act has clearly stated that the figure 8 was added before the figure 4316 immediately after the officers visit to the respondent s factory and this was done on the instruction of Shri M.P.Agarwal Managing Director of the respondent company who promised to send the production s slips to justify that much production on 17.08.98 - Therefore hold that the Commissioner (Appeals) s findings that there was no excess stock in RG-I Register and there was no contravention of the Rule 53 of the Central Excise Rules 1944 is not correct - Decided against the assessee.

Summary

Issues:
1. Discrepancy in stock of grey fabrics and processed fabrics.
2. Alleged clandestine removal of fabrics without payment of duty.
3. Discrepancy in stock of finished goods.
4. Show cause notice issued for duty demand, confiscation, and penalty.
5. Adjudication by Addl. Commissioner and subsequent appeal before Commissioner (Appeals).
6. Reduction of duty demand and penalty by Commissioner (Appeals).
7. Appeal by Revenue challenging the order of Commissioner (Appeals) regarding confiscation of seized PV Shirting.

Issue 1: Discrepancy in stock of grey fabrics and processed fabrics
The central excise officers found discrepancies in the stock of grey fabrics and processed fabrics during their visit to the respondent's factory. The recorded balance did not match the actual stock, leading to suspicions of clandestine removal without payment of duty.

Issue 2: Alleged clandestine removal of fabrics without payment of duty
The officers suspected that a significant quantity of grey fabrics had been removed clandestinely after processing without duty payment. This suspicion arose due to discrepancies in recorded and actual stock levels, leading to duty demands and further investigations.

Issue 3: Discrepancy in stock of finished goods
Upon checking the stock of finished goods, discrepancies were found in the recorded and actual stock levels of polyester viscose shirting. The officers suspected unaccounted production and stock manipulation to evade duty payments, leading to further scrutiny and actions.

Issue 4: Show cause notice issued for duty demand, confiscation, and penalty
Based on the discrepancies observed, a show cause notice was issued to the respondent for duty demands, confiscation of excess stock, and imposition of penalties under relevant sections of the Central Excise Act, 1944.

Issue 5: Adjudication by Addl. Commissioner and subsequent appeal before Commissioner (Appeals)
The Addl. Commissioner adjudicated the show cause notice, confirming duty demands, imposing penalties, and ordering confiscation. The respondent appealed before the Commissioner (Appeals) challenging the decision, leading to a review of the case.

Issue 6: Reduction of duty demand and penalty by Commissioner (Appeals)
The Commissioner (Appeals) reduced the duty demands and penalties imposed by the Addl. Commissioner, providing relief to the respondent. However, the order of confiscation of seized PV Shirting was set aside, prompting an appeal by the Revenue.

Issue 7: Appeal by Revenue challenging the order of Commissioner (Appeals) regarding confiscation of seized PV Shirting
The Revenue appealed against the decision of the Commissioner (Appeals) to set aside the order of confiscation of the seized PV Shirting. The appeal focused on the discrepancies in stock records and suspicions of unaccounted production and evasion of duty payments.

In the detailed analysis, the Tribunal reviewed the provisions of the Central Excise Rules, 1944 concerning stock maintenance and penalties for non-accountal of goods. The dispute centered on unaccounted stock of finished PV Shirting at the respondent's factory during the officers' visit. The Commissioner (Appeals) differentiated between finished and unfinished goods, leading to a reduction in duty demands and penalties. However, the Tribunal found discrepancies in stock entries and upheld the original adjudicating authority's decision on confiscation and penalties, overturning the Commissioner (Appeals) order. The appeal by the Revenue was allowed, emphasizing the importance of accurate stock maintenance and duty payments in excise matters.