2013 (10) TMI 562 - AT - Central Excise

Excise duty evasion case: Tribunal rules for Revenue against interconnected companies. Compliance is key.

The Tribunal found in favor of the Revenue in the case involving alleged excise duty evasion by interconnected companies. Shree Krishna Industries and ... Clandestine Removal of goods - Wrong Availment of SSI Exemption – Waiver of Pre-deposit - Revenue was of the view that the value of clearances of both the units was liable to be clubbed for determination of excise duty – Held that:- The incriminating statements by the director and records resumed clearly indicate that both the units have indulged in clandestine manufacture and clearances of the excisable goods and have been evading duty - Non accountal of raw materials and clearances of finished goods without payment of duty has been admitted by the partner/proprietor and the evidence which are on records in the form of private books recovered and later confirmed in their statements - Prima facie, it is case in favour of the Revenue - The applicants have not been able to make a good case for waiver of duty and imposition of penalty - the applicant has deposited Rs.78,60,500/- during investigation - the applicant to deposit another amount of Rs.50 lakh – upon such submission rest of the duty to be waived till the disposal – Partial Stay granted. Issues:Stay applications for evasion of excise duty, clubbing of clearances for determination of excise duty, prima facie case of duty evasion, non-accountal of raw materials, imposition of penalty.Analysis:The judgment pertains to two stay applications filed by Shree Krishna Industries and Shree Krishna Udyog against an order dated 31.01.2013. The main issue revolves around the alleged evasion of excise duty by the interconnected companies. The investigation revealed that Shree Krishna Udyog was established to exploit the Small Scale Industry (SSI) exemption without engaging in actual manufacturing activities. The companies were found to be interconnected, with Shree Krishna Industries exercising financial and management control over Shree Krishna Udyog. Various incriminating documents, statements, and evidence indicated that the units were involved in clandestine manufacturing and clearance of excisable goods to evade duty.The evidence presented included non-furnishing of job work intimation, lack of documentary proof of inspection for raw material procurement, and discrepancies in invoicing between the two units. Statements from key individuals, such as Shri Pankaj Bansal, highlighted the irregularities in operations, including the use of invoice books interchangeably between the units. Detailed scrutiny of diaries and records revealed significant discrepancies in raw material procurement, manufacturing, and clearance of finished goods without payment of duty, resulting in substantial duty evasion amounting to Rs.3,12,26,046.The Tribunal found the evidence compelling and ruled in favor of the Revenue, noting that the applicants failed to justify a waiver of duty and penalty. Despite a partial deposit of Rs.78,60,500 during the investigation, the Tribunal directed the applicants to deposit an additional Rs.50 lakh within twelve weeks. Upon compliance, the balance pre-deposit of duty and penalty would be waived, and recovery stayed pending the appeal's disposal. The judgment underscores the importance of maintaining accurate records, compliance with excise laws, and the consequences of attempting to evade duty through fraudulent practices.