2004 (3) TMI 704 - AT - Central Excise

Tribunal overturns duty demand, penalty & interest under Central Excise Act

The Tribunal allowed the appeal filed by the appellants against the duty demand, penalty, and interest imposed under Section 11A and 11AB of the Central ... Demand - Clandestine manufacture and removal Issues: Alleged suppression of production of cotton yarn, duty demand under Section 11A, imposition of penalty, interest under Section 11AB, discrepancies in stock records, comparison of private records with RG 1 register, explanation for variations in figures, absence of credible evidence for clandestine manufacture and removal of goods.In this case, the appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise, upholding the duty demand of Rs. 1,53,120 from the appellants under Section 11A of the Central Excise Act, 1944, along with a mandatory penalty of the same amount and interest under Section 11AB. The appellants, engaged in cotton yarn manufacturing, were accused of suppressing production and not accounting for the issue of cotton for yarn manufacture. Sixty-six bales of cotton were found in excess without proper accounting, leading to a show cause notice for clandestine manufacture and clearance of 90,035 Kgs of yarn, resulting in the duty demand and penalties.The appellants argued that discrepancies in stock records were due to various reasons like variations in cone winding machine stock, rewinding defective cones, and maintaining private records for quality control and wage payments. They cited previous Tribunal judgments to support their case. The Department contended that the raw materials were not accounted for in statutory registers, and production was also not properly recorded. The authorities rejected the appellants' explanations for the discrepancies, leading to the appeal.The Tribunal analyzed the case and found that the alleged differences in yarn weight were based on a comparison with the private records of the appellants. However, no substantial evidence beyond this comparison was presented by the Department to prove clandestine manufacturing and removal of goods. The Tribunal noted that the appellants regularly filed RT 12 returns, which were assessed by the Department. Referring to a previous case law, the Tribunal held that entries in private records alone, without credible corroborative evidence, were insufficient to establish clandestine activities. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellants due to the lack of substantial evidence supporting the allegations.In conclusion, the Tribunal found no material to uphold the duty demand and penalties imposed, and thus allowed the appeal with any consequential relief deemed appropriate. The judgment was pronounced in open court on 26-3-2004.