Tribunal overturns duty demand & penalty order due to lack of evidence & arbitrary calculations

PRABHAT ZARDA FACTORY (I) PVT. LTD. Versus COMMISSIONER OF C. EX., DELHI-I

PRABHAT ZARDA FACTORY (I) PVT. LTD. Versus COMMISSIONER OF C. EX., DELHI-I - 2006 (197) E.L.T. 228 (Tri. - Del.) Issues:
- Appeal against demand of duty of excise and penalty confirmation
- Validity of Panchnama and investigative findings
- Alleged shortage of glass bottles and calculation methodology
- Lack of evidence on excess production and duty evasion
- Imposition of penalty on the appellants

Issue 1: Appeal against demand of duty of excise and penalty confirmation
The appeals were filed against the Order-in-Appeal confirming the demand of duty of excise and penalty. The appellants, a company and its director, contested the findings and penalties imposed by the Commissioner (Appeals).

Issue 2: Validity of Panchnama and investigative findings
The learned Advocate argued that the Panchnama should only contain factual details of the search and recoveries, not investigative conclusions. He contended that including investigative findings in the Panchnama violated natural justice principles and prejudiced the proceedings.

Issue 3: Alleged shortage of glass bottles and calculation methodology
The appellants disputed the alleged shortage of glass bottles, emphasizing that the calculations were arbitrary and hypothetical. They argued that the assumptions made by the Excise Authorities regarding breakage and losses were not based on physical stocktaking, leading to fictitious figures of excess unaccounted production.

Issue 4: Lack of evidence on excess production and duty evasion
The appellants challenged the lack of evidence supporting the claim of excess production and duty evasion. They highlighted the absence of conclusive proof such as purchase records, electricity usage, or clandestine removal of goods to establish duty liability solely based on theoretical calculations.

Issue 5: Imposition of penalty on the appellants
The appellants contended that no penalty should be imposed as the duty had already been paid. They relied on precedents to argue against penalty imposition, asserting that no evidence supported the allegations under Rule 209A of the Central Excise Rules, 1944.

The Tribunal, after considering both sides' submissions, found the Revenue's case primarily based on hypothetical figures and insufficient evidence. The calculations regarding glass bottle shortages were deemed arbitrary, lacking a factual basis. The Tribunal noted discrepancies in the Panchnama's calculations, highlighting a totaling mistake that significantly impacted the alleged shortage of raw materials. Moreover, the absence of concrete evidence linking glass bottle shortages to clandestine removal of goods without duty payment led the Tribunal to set aside the impugned order and allow both appeals, emphasizing the need for substantial proof in duty evasion cases.