2000 (11) TMI 1158 - AT - Central Excise

Duty demand upheld, penalties modified in appellate decision.

The duty demand of Rs. 10,80,914.36 was upheld. The penalty on appellant No. 1 was reduced to Rs. 2.5 lakhs, while the penalty on appellant No. 2 was set ... Clandestine removal of goods - evidential weight of GRs and gatekeeper's records for clandestine removal - onus on Department to prove clandestine removal - penalty under Section 11AC of the Central Excise Act - penalty under Rule 209A of the Central Excise Rules - legal identity of proprietor and proprietorship concern - discretion to mitigate penalty having regard to facts and supply to paramilitary forcesClandestine removal of goods - evidential weight of GRs and gatekeeper's records for clandestine removal - onus on Department to prove clandestine removal - Sustainability of duty demand based upon discrepancies between GR book entries and excise invoices (duty demand of Rs. 4,84,948.80 P) arising from GRs recovered from transport agent. - HELD THAT: - The Tribunal examined discrepancies in dates and quantities between GRs recovered from M/s. Agra Rajasthan Transport Corporation and the corresponding excise invoices. The appellants' explanation that GRs were issued in advance and that consignments were partly transported by other carriers was rejected because the transport agent (Shri Akhilesh Shukla) initially stated that GRs were issued only when goods were loaded and later altered his statement without providing a valid reason for deviation from the transporter's normal practice. The appellants also failed to show that other transporters followed a practice of issuing advance GRs and could not produce corresponding dutypaying invoices for certain GRs (notably GR No. 653). On this evidence the Department discharged the onus of proving clandestine removal under the GRs and the Tribunal held the demand sustainable. [Paras 6]Duty demand based on the GR book (Rs. 4,84,948.80 P) is upheld.Clandestine removal of goods - evidential weight of GRs and gatekeeper's records for clandestine removal - onus on Department to prove clandestine removal - Sustainability of duty demand based upon gatekeeper's clearance entries which did not tally with produced invoices (duty demand of Rs. 2,14,478.88 P). - HELD THAT: - Entries in the gatekeeper's notebook recorded removals on specific dates and quantities which did not correspond to the invoices produced by the appellants. Invoice No. 122 (dated 2331998) did not match the 2431998 gatekeeper entry in either quantity or description; similarly, invoices Nos. 126 and 127 did not correspond with the 2731998 entries. Because the gatekeeper's contemporaneous entries could not be corelated with the invoices, the Department's finding of clandestine removals based on those entries was held to be sustainable. [Paras 6]Duty demand based on the gatekeeper's note book (Rs. 2,14,478.88 P) is upheld.Penalty under Section 11AC of the Central Excise Act - penalty under Rule 209A of the Central Excise Rules - legal identity of proprietor and proprietorship concern - discretion to mitigate penalty having regard to facts and supply to paramilitary forces - Imposition and quantum of penalties upon the appellants: reduction of penalty on the assesseemanufacturer and setting aside penalty on proprietor. - HELD THAT: - The Tribunal found that penalty for contravention of the Rules was warranted against the proprietorship concern. Having regard to the totality of facts and circumstances, including that the goods were supplied to paramilitary forces, the Tribunal exercised its discretion to reduce the penalty imposed on the proprietorship concern to Rs. 2.5 lakhs. As regards the proprietor personally, the Tribunal set aside the penalty imposed under Rule 209A on the ground that a proprietorship concern and its proprietor do not have separate legal identities in law, and therefore personal penalty could not be sustained. [Paras 7]Penalty on appellant No.1 reduced to Rs. 2.5 lakhs; penalty on appellant No.2 (proprietor) set aside.Final Conclusion: The appeals were partly allowed: the total duty demand of Rs. 10,80,914.36 P was upheld (including the amounts not contested by the appellant), the penalty on the proprietorship concern was reduced to Rs. 2.5 lakhs, and the penalty imposed on the proprietor was set aside on the ground of nonseparate legal identity; one appeal is partly allowed and the other is allowed. Issues Involved:1. Duty demand of Rs. 4,84,948.80 P.2. Duty demand of Rs. 2,14,478.88 P.3. Imposition of penalty on appellant No. 1.4. Imposition of penalty on appellant No. 2.Issue-wise Detailed Analysis:1. Duty demand of Rs. 4,84,948.80 P:The discrepancy in dates and quantities between the GRs (Goods Receipts) and invoices was highlighted. For instance, in Sl. Nos. 1 and 2, the date of invoice and date of GR did not tally. In Sl. Nos. 3, 4, and 5, there were discrepancies in both dates and quantities. The appellants attempted to correlate the GRs and invoices by explaining that GRs were obtained in advance and that the goods covered by the corresponding invoices were partly transported through M/s. Agra Rajasthan Transport Corp. and other transporters. However, this correlation was not accepted because Shri Akhilesh Shukla, the Transport Agent, initially stated that no advance GRs were issued and GRs were issued when goods were loaded onto the truck before their removal. Although he later stated that advance GRs were prepared for M/s. Naveen Textile Agencies, no valid reason was given for deviating from the normal practice. The appellant No. 1 also failed to establish that other transporters followed the procedure of issuing advance GRs. Additionally, the appellant could not show the corresponding duty-paying invoice for GR No. 653, dated 22-1-1998. Therefore, the contention of appellant No. 1 was not tenable, and the Department successfully proved the clandestine removal of goods under the above GRs. Hence, the duty demand of Rs. 4,84,948.80 P was upheld.2. Duty demand of Rs. 2,14,478.88 P:This demand was based on entries dated 24-3-1998 and 27-4-1998 in a notebook recovered from the gatekeeper of appellant No. 1's factory. The entry on 24-3-1998 showed the removal of 48 tent bundles and 3 tents, which was not covered by Invoice No. 122, dated 23-3-1998, as it showed clearance of 80 tents, 40 walls, and 48 poles. Similarly, the entry dated 27-3-1998 showed the removal of 180 tent bundles, 12 bamboo bundles, 60 kanat bamboos, and 5 other bundles, which could not be correlated with Invoice Nos. 126 and 127 produced by the appellants. Therefore, the finding of clandestine removal of goods involving the above-mentioned duty was also upheld.3. Imposition of penalty on appellant No. 1:The penalty on appellant No. 1 was warranted for contravention of the Rules. However, considering the totality of the facts and circumstances, including the fact that the goods in question were supplied to para-military forces, the penalty on appellant No. 1 was reduced to Rs. 2.5 lakhs.4. Imposition of penalty on appellant No. 2:The penalty on appellant No. 2, who is the proprietor of appellant No. 1, was set aside as, in the eye of law, a proprietorship concern and its proprietor are one and the same and do not have separate legal identities.Conclusion:The duty demand of Rs. 10,80,914.36 P was upheld. The penalty on appellant No. 1 was reduced to Rs. 2.5 lakhs. The penalty on appellant No. 2 was set aside. Appeal No. E/1680/2000-NB was partly allowed, and Appeal No. E/1681/2000-NB was allowed.