2001 (10) TMI 420 - AT - Central Excise

Alleged clandestine goods removals and stock shortages based on unverified weighment slips; duty demand and penalties u/s11AC set aside.

The dominant issue was whether duty demand for alleged clandestine removals and stock shortages could be sustained on the basis of unverified ... Benefit of Modvat credit under Rule 57A - Demand - Clandestine removal on the basis of unauthentic entries - duty evasion - shortages in the stocks of inputs and the pipes - imposition of penalty under Section 11AC - HELD THAT:- In the weighment slips, there was neither full description of the goods nor of the party to whom the goods belonged. No investigation had been made with reference to the conveyances, in which the goods were transported and no statement of the drivers of such conveyances had been recorded. The evidence of such weighment slips is not reliable and demand of duty could not be made on the basis of such unreliable evidence. With regard to the four paper slips/weighment slips, it had been submitted that the goods covered by these slips had been cleared on regular invoices on 10-5-97 and the goods had been consigned to the Government Department and other known parties and the proper Central Excise duty had been paid thereon. As regards the alleged shortages in the stocks of inputs and the pipes, it was submitted that the goods were not physically verified and no weighment was made. We find that no panchnama was drawn at the time of checking. There is no record as on what basis the shortages were arrived at. The appellants have taken the plea that no stock taking was done and it was just an estimate on the basis of which the demand could not be made. The adjudicating authority had not taken any view with regard to the submissions of the appellants in this regard. The various paper slips, weighment slips, etc. had not been verified with reference to the transactions of the appellants. It is also not clear from the impugned order as on what basis a view was taken that there had been excess consumption of raw materials, excess clearance of PVC waste, etc. So far as imposition of penalty under Section 11AC of the Central Excise Act, 1944 and Rule 173Q and 209A of the Central Excise Rules, 1944 is concerned, it is easy to say that the assessee and Shri Sudesh Gupta, Director had no knowledge of the clandestine activity undertaken. Assessee had admitted that it is difficult to conduct stocktaking of huge stocks of PVC pipes. Keeping this statement and the evidences brought by the investigation in mind it is apparent that assessee was clearing the goods without payment of duty having the confidence that stock taking can always be agitated. They raised the issue of improper stock taking nearly two years after the date of detection of the case when that stock of PVC pipes is not available. The extended period of five years under Section 11A is, therefore, attracted in this case and assessee is liable for action under Section 11AB and 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944. Shri Sudesh Gupta, Director of the assessee is also liable for penal action under Rule 209A of the Central Excise Rules, 1944 as it is not possible that assessee would clear such a huge quantity of PVC pipes and PVC scraps without his knowledge. After going through the facts on record and the discussion as made in the order-in-original and the impugned order-in-appeal, we consider that the demand has been made without adequate basis. On the basis of material on record, we consider that the demand is not sustainable. We also consider that in the facts and circumstances of the case, there was no justification for imposing the penalty including the penalty on the Director. Taking all the relevant facts and considerations into account, we allow both the appeals with consequential benefit to the appellants as per law and order accordingly. Issues involved: Appeals challenging Order-in-Appeal dated 14-3-2001 regarding duty payment on PVC pipes and penalties imposed.Summary:1. The appellants, M/s. Sober Plastics Pvt. Ltd. and Shri Sudesh Gupta, Director, contested a show cause notice alleging duty evasion on 67,831 Kgs. of PVC pipes and shortages in inputs. The Central Excise officers based their findings on paper slips, weighment slips, and Dharamkanta slips. 2. Appellants argued that the slips were rough jottings, not maintained in regular business course, and lacked evidence of duty evasion. They disputed the authenticity of the slips and highlighted that all clearances were duty-paid. They also contended that physical verification was not conducted, and no panchnama was drawn.3. The Joint Commissioner upheld the duty demand, citing the appellants' admission of shortages and rejecting their contention of improper stocktaking. However, no panchnama was drawn during checking, and shortages were estimated without proper verification.4. The extended period of limitation was invoked based on alleged concealment of facts and clandestine clearance. The Tribunal found the demand lacked adequate basis and justification, ruling in favor of the appellants and setting aside the penalties.5. The Tribunal concluded that the demand was unsustainable, considering the lack of proper verification and justification for penalties. Both appeals were allowed, providing consequential benefits to the appellants in accordance with the law.