2015 (1) TMI 634 - AT - Central Excise

Tribunal upholds duty & credit demands for shortages, penalty set aside. Partial appeal success.

M/s Premier Alloys Ltd., Shri Ajay Kumar Jain, Director] Versus CCE, Lucknow and vice-versa

M/s Premier Alloys Ltd., Shri Ajay Kumar Jain, Director] Versus CCE, Lucknow and vice-versa - 2015 (328) E.L.T. 567 (Tri. - Del.) Issues Involved:1. Alleged clandestine removal of MS Bars by M/s Premier Alloys Ltd. (PAL).2. Shortage of MS Bars and MS Ingots during stock verification.3. Recovery of Central Excise duty and Cenvat credit.4. Imposition of penalties on PAL and its Director, Shri Ajay Kumar Jain.5. Denial of cross-examination of key witnesses.6. Validity of evidence based on transporters' goods receipts (GRs).Detailed Analysis:1. Alleged Clandestine Removal of MS Bars by PAL:The Department alleged that PAL clandestinely removed MS Bars without payment of duty, using invoices from various traders. The investigation included searches at multiple premises, revealing shortages of MS Bars and MS Ingots. Statements from individuals like Shri Subhash Agarwal and Shri Kulbhushan Jain indicated that PAL used traders' invoices for such clearances. However, no incriminating documents were found at PAL's premises. The appellants argued that the case was based on assumptions and lacked direct evidence from PAL's premises.2. Shortage of MS Bars and MS Ingots:During a search on 15/07/02, a shortage of 146.24 MT of MS Bars and 67 MT of MS Ingots was found. The appellants contended that the shortages were not real and were determined using average weights rather than physical weighment. The adjudicating authority upheld the duty and Cenvat credit demands based on these shortages, as the stocktaking was conducted in the presence of PAL's employee, who did not dispute the method at the time.3. Recovery of Central Excise Duty and Cenvat Credit:The show cause notice demanded recovery of Rs. 3,09,535/- for the shortage of MS Bars and Rs. 1,04,542/- for the shortage of MS Ingots. Additionally, Rs. 21,62,449/- was demanded for alleged clandestine removals based on transporters' GRs. The Commissioner (Appeals) confirmed part of the duty demand but remanded and dropped other parts, leading to appeals from both PAL and the Department.4. Imposition of Penalties:Penalties were imposed on PAL under Section 11AC and on Shri Ajay Kumar Jain under Rule 26 of the Central Excise Rules, 2001. The Commissioner (Appeals) reduced these penalties, but both PAL and the Department appealed against the decision. The Tribunal found no evidence linking Shri Ajay Kumar Jain directly to the clandestine activities, leading to the setting aside of the penalty on him.5. Denial of Cross-Examination:The appellants requested cross-examination of key witnesses, including Shri Subhash Agarwal and Shri Kulbhushan Jain, whose statements were crucial to the Department's case. The denial of cross-examination was argued to be a violation of natural justice. The Tribunal agreed, citing legal precedents that support the necessity of cross-examination in such cases.6. Validity of Evidence Based on Transporters' GRs:The duty demand was partly based on GRs from various transporters. The Tribunal found that the GRs lacked sufficient details to link them conclusively to PAL. Additionally, the statements from transporters were not corroborated by other evidence. The Tribunal set aside the duty demand based on these GRs due to insufficient evidence and procedural lapses.Conclusion:The Tribunal upheld the duty and Cenvat credit demands related to the shortages of MS Bars and MS Ingots but set aside the demands based on transporters' GRs due to lack of evidence and denial of cross-examination. The penalty on Shri Ajay Kumar Jain was also set aside. The appeals by PAL were partly allowed, and the Revenue's appeal was dismissed.