2003 (12) TMI 555 - AT - Central Excise

Appeals Granted: Lack of Evidence Overturns Duty, Penalties, and Interest in Manufacturing Allegations.

The appeals were allowed, and the Order-in-Original was set aside due to insufficient evidence. The Adjudicating Authority's decision to confirm duty, ... Demand - Clandestine manufacture and removal - misuse of SSI exemption - Presumption of manufacturing without evidence - Legal proof - HELD THAT:- There is no evidence on record to suggest that in response to this letter, the Pune office ever sent any intimation to the Ministry that the firm LEW had closed the manufacturing unit and that the goods during the period in dispute were supplied under their invoices, by the firm JEW. It is also evident on record that the firm LEW in fact shifted their factory premises on account of dispute with the Panchayat of Village Nangloi to premises No. 5-B, New Rohtak Road Industrial Area, in May, 1998. Even while carrying out the manufacturing activity at this new premises, they had been receiving raw material and clearing their final products from the address of their office i.e. 4/1, New Rohtak Road (first floor), New Delhi. The raid was conducted at this premises and record was seized but no incriminating circumstances/evidence/document has been found from their possession to prove that during the period in dispute they never manufactured the goods for supply to the Ministry of Defence. Similarly, no discrepancy in the statutory record of the firm JEW regarding receipt of raw material and clearance of finished products had been detected. Mere presence of some empty invoices with the printing name of the firm LEW, from the premises of the firm JEW could not provide conclusive proof to the effect that they had been clearing the goods on the basis of those invoices especially when at no time their goods with such invoices were ever intercepted in transit and none from the Ministry of Defence to whom they had supplied the goods, had come forward to depose that the goods were actually manufactured by the firm JEW but were supplied under the invoices of LEW. There is no evidence on record to prove that the firm LEW was a dummy firm flouted by the firm JEW and there was any flow back of money from one firm to another. The central excise registration of the firm LEW had never been revoked at any time during the period in dispute for having become non-existent. It is well settled that conjuctures and surmises cannot take place of legal proof. The allegations of clandestine manufacture and removal of the goods have to be established by the department by cogent and convincing evidence. The duty demand on such allegations cannot be based on assumptions and presumptions drawn from stray facts and circumstances. Consequently, the impugned order of the Adjudicating Authority is set aside in toto. The appeals of the appellants are allowed with consequential relief, if any, permissible under the law. Issues Involved: Duty confirmation against multiple appellants, penalty imposition, misuse of SSI exemption, presumption of manufacturing without evidence.Summary:The appeals were directed against an Order-in-Original confirming duty, penalty, and interest against the firm appellant for manufacturing and clearing excisable goods without payment of duty. The penalty was imposed on partners and firms under Rule 209A based on various circumstances, including sealed premises, correspondence, and lack of evidence of actual manufacturing.The Counsel argued that no tangible evidence proved the goods were manufactured by the firm appellant, challenging the order as based on conjectures. The SDR maintained the correctness of the order, relying on the facts and circumstances presented.Upon review, it was found that the firm JEW and LEW had separate existence and operations. The central excise registration of LEW for manufacturing fire extinguishers was duly verified and approved. Disputes with development authorities did not imply cessation of manufacturing by LEW.The presumption that JEW manufactured goods for LEW without evidence was unfounded. Lack of proof of extra raw material, electricity consumption, or labor at JEW's premises undermined the duty confirmation. The use of LEW's brand name by JEW did not substantiate the allegations.The shift of LEW's factory premises did not indicate non-manufacturing during the disputed period. No incriminating evidence was found during raids. The absence of evidence of dummy firms or money flow between entities further weakened the department's case.The judgment emphasized that legal proof, not conjectures, is required for duty demands. Allegations of clandestine activities must be supported by cogent evidence, not assumptions. Consequently, the Adjudicating Authority's order was entirely set aside, and the appeals of the appellants were allowed.In conclusion, the judgment overturned the duty confirmation and penalties imposed, highlighting the necessity of concrete evidence in establishing allegations of clandestine activities in excise matters.