2012 (3) TMI 403 - AT - Central Excise

Tribunal restores duty demands, penalties against ingot manufacturers, rejects appeals in clandestine activities case

The Tribunal allowed appeals against the ingot manufacturers, restoring duty demands and penalties. It rejected appeals against MSRMPL, finding evidence ... Clandestine manufacture and removal - supply of non-duty paid ingots to MSRMPL - penalty on company - Held that: - the evidences appearing against MSRMPL that they were indulging in clandestine manufacture and clearance of rolled steel products and this case is already decided against MSRMPL. So it follows that they had been obtaining raw materials also without payment of duties. Some of the raw material suppliers had accepted their complicity had paid the duties involved. Tribunal in the case of WOODMEN INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE, PATNA [2003 (9) TMI 228 - CESTAT, KOLKATA], held that penalty under Rule 209A could be imposed on natural persons only and not on a company. MSRMPL have been proceeded against separately for the offence of manufacture of rolled products from the unaccounted material dealt with in these proceedings. In that case duty has been demanded and penalty imposed. So we do not consider it necessary to impose penalties separately for buying the non-duty paid material and for this reason we propose not to impose separate penalties on MSRMPL. Appeal allowed - decided partly in favor of Revenue. Issues Involved:1. Clandestine manufacture and removal of goods by MSRMPL.2. Supply of non-duty paid steel ingots to MSRMPL by various manufacturers.3. Imposition of penalties under Rule 209A of the Central Excise Rules, 1944 on MSRMPL.4. Validity of third-party records as evidence.5. Procedural fairness in adjudication and appeal processes.Detailed Analysis:1. Clandestine Manufacture and Removal by MSRMPL:The investigation revealed that MSRMPL was involved in the clandestine manufacture and removal of steel products. Evidence included records from Mola Kanda showing unaccounted weighments, financial records indicating payments for unaccounted consignments, and physical seizures of goods without invoices. Statements from MSRMPL's directors and other involved parties corroborated these findings. The Tribunal concluded that the evidence sufficiently established MSRMPL's involvement in clandestine activities.2. Supply of Non-Duty Paid Steel Ingots:The investigation extended to manufacturers supplying non-duty paid steel ingots to MSRMPL. Evidence against these manufacturers included weighment records from Mola Kanda, statements from involved parties, and discrepancies in the recorded weights of consignments. Some manufacturers admitted to supplying unaccounted ingots and paid the duty and penalties. The Tribunal found the evidence against these manufacturers credible and restored the duty demands and penalties initially imposed by the adjudicating authority.3. Imposition of Penalties under Rule 209A:The Tribunal examined whether penalties under Rule 209A could be imposed on MSRMPL. It was argued that such penalties could only be imposed on natural persons, not companies. The Tribunal referred to conflicting judgments, noting that the Supreme Court had upheld the view that penalties under Rule 209A could be imposed on natural persons only. However, considering that MSRMPL had already been penalized for the clandestine manufacture of rolled products, the Tribunal decided not to impose additional penalties for buying non-duty paid materials.4. Validity of Third-Party Records as Evidence:The Tribunal addressed the issue of relying on third-party records as evidence. It referenced several case laws, concluding that third-party records could be accepted as evidence if corroborated by other facts and circumstances. In this case, the records from Mola Kanda were authenticated by statements from individuals managing the weigh-bridge, and the appellants did not cross-examine these individuals. The Tribunal found the records reliable and sufficient to prove the clandestine activities.5. Procedural Fairness:The Tribunal noted that the appellants did not request cross-examination of the individuals maintaining the Mola Kanda records during the adjudication stage. The Commissioner (Appeals) had set aside the adjudication orders on grounds of procedural unfairness, including the non-supply of relied-upon documents and lack of opportunity for cross-examination. However, the Tribunal found that the appellants' failure to request cross-examination at the appropriate stage undermined their procedural fairness argument.Conclusion:The Tribunal allowed the appeals against the ingot manufacturers, restoring the duty demands and penalties. It rejected the twenty appeals against MSRMPL, finding sufficient evidence of clandestine activities but deciding not to impose additional penalties under Rule 209A. The Tribunal emphasized the reliability of third-party records when corroborated and the importance of procedural fairness in adjudication processes.