2012 (4) TMI 432 - HC - Central Excise

Appeals Dismissed, Penalties Upheld for Clandestine Resin Sale

The appeals were dismissed as the court found no substantial question of law. The Tribunal's findings on clandestine removal, calculation of clandestinely ... Clandestine removal - computation of quantity – assessee contested that the quantity computed by the Tribunal is based upon surmises and conjectures and there is no concrete evidence or material to hold that 768.03 Mt. or resin CP172SG was clandestinely sold – Held that:- Statement of Director present at the time of search admitted to clandestine removal and sale of resin CP172SG and also stated that he had partly used and consumed the resin in the manufacture of Filler Cords and PVC Tapes - the aforesaid quantum of 768.03 Mt., has been calculated by the Tribunal on the basis of the quantity purchased, less the consumption for production of PVC compound as recorded in the records/books. The Tribunal has given benefit of doubt to the Appellant and other appellants on use of resin CP172SG in the manufacture of PVC Tapes to the extent of 230 Mt - under Rule 15(1) of CCR, 2004, any input or capital goods, in respect of which cenvat credit has been taken wrongly, are liable for confiscation, so the illicitly diverted CP1725Sg resin was liable for confiscation – appellant with other parties who had dealt with the illicitly diverted resin knowingly are liable for confiscation and penalty under Rule 26 of CER, 2002 - upheld imposition of penalty - against assessee. Issues Involved:1. Clandestine removal of resin CP172SG.2. Calculation of the quantity of resin CP172SG clandestinely sold.3. Use of resin CP172SG in the manufacture of PVC compound.4. Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on companies and individuals.5. Quantum of penalty/fine imposed on individuals.Issue-wise Detailed Analysis:1. Clandestine Removal of Resin CP172SG:The appellant, Natraj Plast Industries Ltd., was accused of clandestine removal and sale of resin CP172SG. The Tribunal found that 768.03 MT of resin was clandestinely sold to M/s Aditya Plastics and M/s Mukesh Industries. The appellant admitted to the clandestine removal but contested the quantity determined by the Tribunal, arguing it was based on surmises and conjectures without concrete evidence.2. Calculation of Quantity of Resin CP172SG Clandestinely Sold:The Tribunal calculated the clandestinely sold quantity by considering the total resin purchased (1102.715 MT) and subtracting the quantity used for manufacturing PVC Tapes (230.80 MT) and PVC Filler Cord (104.01 MT). The Tribunal concluded that 768.03 MT of resin was unaccounted for and therefore clandestinely sold. The Tribunal rejected the appellant's claim of using resin CP172SG for manufacturing PVC compound, as it was raised for the first time during assessment proceedings and not supported by earlier statements.3. Use of Resin CP172SG in Manufacture of PVC Compound:The Tribunal found no evidence that resin CP172SG was used in the manufacture of PVC compound. Mr. Dinesh Gupta's statements did not mention such use, and the Tribunal noted that resin 6701 was typically used for PVC compound manufacture. The Tribunal's findings on this aspect were upheld as there was no error or reason to consider them perverse.4. Imposition of Penalty under Rule 26 of Central Excise Rules, 2002:The Tribunal imposed penalties on Natraj Plast Industries Ltd., Tanishq Wires & Conductors Pvt. Ltd., and individuals involved under Rule 26 for dealing with illicitly diverted resin. The appellant argued that companies could not be penalized under Rule 26 due to lack of mens rea. However, the court upheld the penalties, referencing the Supreme Court's decision in Agarwal Trading Corporation and Ors v. Assistant Collector of Customs, which established that companies could be prosecuted and penalized for economic crimes.5. Quantum of Penalty/Fine Imposed on Individuals:The Tribunal imposed fines of Rs. 5 lacs each on Sunil Mittal and Rajesh Mittal, and Rs. 15 lacs on Mr. Dinesh Gupta. The appellant contested the fines, arguing the Tribunal could not quantify the exact quantity of resin dealt with by Sunil and Rajesh Mittal. However, the Tribunal's findings indicated that substantial quantities of resin were found in their premises, justifying the fines. The fine on Mr. Dinesh Gupta was reduced from Rs. 50 lacs to Rs. 15 lacs, considering the benefit of doubt given to Mr. Gaurav Gupta, his son.Conclusion:The appeals were dismissed as the court found no substantial question of law. The Tribunal's findings on clandestine removal, calculation of clandestinely sold resin, use of resin in manufacturing, and imposition of penalties were upheld. The penalties imposed on the companies and individuals were deemed appropriate and justified based on the evidence and legal precedents.