2013 (11) TMI 746 - AT - Central Excise

Court Confirms Duty Demand, Upholds Cenvat Credit, Imposes Personal Penalties

The court confirmed the duty demand of Rs. 12,43,861/- for clandestine removal of goods along with an equivalent penalty. However, the admissibility of ... Clandestine removal of goods – Common records in one premises maintained for three premises - Shortage of finished goods found on examination – Held that:- Stock taking of the finished goods was undertaken by the officers in the presence of appellants and appellant never raised any objection to the method of stock taking - Any representation made afterwards has to be considered only as an afterthought when the duty liability, worked out on the shortage of finished goods manufactured and cleared by the appellants, was voluntarily paid without protest – thus, Duty demand has been correctly confirmed by the appellant along with imposing penalty equivalent to the duty involved. Imported Nickel cathodes Purchased on high sea sale basis admissible for cenvat credit or not – Held that:- Following Commissioner vs. Dhanlaxmi Tubes & Metal Industries -[2012 (10) TMI 263 - GUJARAT HIGH COURT ] - as there is no independent positive documentary evidence/statement confirming that imported Nickel has in fact has been diverted elsewhere and has not reached appellant’s factory - No Nickel was found short at the time of Stock taking by the visiting officers of Central Excise and no quantity diverted - Nickel was seized anywhere in the proceedings, it cannot be appreciated that imported Nickel was diverted in and around Delhi - cenvat credit with respect to imported Nickel was correctly availed by the appellant as their duty paid character and use in the manufacture of end product has been established by the records maintained by the appellant along with their confirming statements that inputs have been used for the manufacture of the finished goods. Penalty u/s 11AC of the central excise act, 1944 - Penalty on Director and vice president under rule 26 of central excise rules, 2002 and rule 15 of cenvat credit rules 2004 – Held that:- As the credit with respect to Nickel has been held to be admissible, personal penalties imposed upon all the appellants under Rule 15 of the Cenvat Credit Rules, 2004 set-aside and corresponding equal penalty imposed under Section 11AC read with Rule 15 (2) of the Cenvat Credit Rules, 2004 also set aside - For clandestine removal of finished goods, personal penalties are required to be imposed upon the Director and vice President of the main appellant under Rule 26 of the Central Excise Rules, 2002 as they could not satisfactorily explain the shortages/ clandestine removals – Decided partly in favour of Assessee. Issues Involved:1. Demand of Rs. 12,43,861/- for clandestine removal of goods.2. Admissibility of cenvat credit of Rs. 1,16,21,289/- on imported Nickel cathodes.3. Imposition of penalties on various individuals and entities.Detailed Analysis:1. Demand of Rs. 12,43,861/- for Clandestine Removal of Goods:The main appellant faced a demand of Rs. 12,43,861/- for the clandestine removal of goods, which was initially admitted but later retracted. The court observed that the stock-taking of finished goods was performed in the presence of the appellants, who did not object to the method. The duty liability was voluntarily paid without protest, and any subsequent representation was considered an afterthought. Therefore, the duty demand of Rs. 12,43,861/- was confirmed along with an equivalent penalty.2. Admissibility of Cenvat Credit of Rs. 1,16,21,289/- on Imported Nickel Cathodes:The Revenue alleged that the Nickel cathodes were cleared from ICD, Tughlakabad, and sold around Delhi, with only cenvat credit taken based on bills of entry without actual receipt of the inputs in the appellant's factory. The appellant argued that local transporters were used to move goods from ICD, Tughlakabad to a godown, from where they were sent to the factory. The court noted several inconsistencies in the statements and evidence provided by the Revenue, including unreliable statements from transporters and the lack of corroborative evidence. The court highlighted the absence of any seizure of inputs or positive statements confirming the diversion of Nickel cathodes. The court also referred to the Gujarat High Court's decision in the case of Commissioner vs. Dhanlaxmi Tubes & Metal Industries, which supported the appellant's case. The court concluded that the cenvat credit was correctly availed by the appellant, as the duty-paid character and use in manufacturing were established.3. Imposition of Penalties:Given that the cenvat credit on Nickel was found admissible, the penalties imposed under Rule 15 of the Cenvat Credit Rules, 2004, and Section 11AC were set aside. However, for the clandestine removal of finished goods involving Central Excise duty of Rs. 12,43,861/-, personal penalties were imposed on Shri Dilipbhai C. Chandan and Shri Praveen C. Jain. The penalties were reduced from Rs. 10,00,000/- and Rs. 2,00,000/- to Rs. 2,00,000/- and Rs. 50,000/- respectively, considering the duty evaded.Conclusion:The appeals were allowed to the extent that the cenvat credit on imported Nickel was upheld, and the corresponding penalties were set aside. However, penalties for clandestine removal of finished goods were imposed but reduced in amount.