Company and Director found liable for duty evasion, ordered to make deposits per Section 35F. Employee penalties waived.

The tribunal found the Appellant Company and its Managing Director liable for duty evasion and directed them to make specified pre-deposits totaling Rs. 8,40,00,000 for compliance with Section 35F. The Managing Director was also directed to deposit an additional Rs. 10,00,000. Penalties on employees were waived as they were found to be acting under management's directions. Compliance was required by 10/04/2015, emphasizing the importance of safeguarding revenue interests.

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Issues Involved:
1. Alleged shortage of MS Ingots and duty evasion.
2. Recovery of parallel invoices indicating duty evasion.
3. Recovery of despatch slips and other documents from Maheteshwari Dhaba.
4. Financial hardship and compliance with Section 35F.
5. Imposition of penalties on the Managing Director and employees under Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Alleged Shortage of MS Ingots and Duty Evasion:
The allegation of duty evasion amounting to Rs. 40,19,741/- was based on the alleged shortage of 12,096.565 MT of MS Ingots detected during stock taking on 04/12/08. The stock taking was conducted in the presence of the Authorized Signatory of the Appellant Company, Shri Dinesh Gupta, who did not express any dissatisfaction with the method of stock verification at that time. The Appellant Company later claimed that the shortage was determined by eye estimation and not by actual weighment. However, the tribunal noted that there was no immediate protest from the company regarding the stock taking method, and the shortage corroborated the allegation of clandestine removal. Additionally, the recovery of 13 parallel invoices involving duty of Rs. 6,98,495/- from the factory premises further supported the claim of duty evasion.

2. Recovery of Parallel Invoices Indicating Duty Evasion:
During the preventive operation, 18 parallel invoices were recovered from the factory premises and 13 from the premises of some customers. These invoices bore the same serial numbers and dates as the duty-paid invoices but were issued to different parties. The total duty involved was Rs. 16.06 lakhs. The tribunal noted that no explanation was provided by the Appellant Company for these parallel invoices, which pointed to the evasion of duty by the clandestine removal of unaccounted production.

3. Recovery of Despatch Slips and Other Documents from Maheteshwari Dhaba:
The main documents indicating large-scale duty evasion were recovered from Maheteshwari Dhaba, located adjacent to the factory gate. These included 11 files containing despatch slips, weighment registers, and attendance registers. The despatch slips detailed the despatches of MS Bars and Girders, including the date, quantity, customer details, and truck numbers. The tribunal noted that the despatch slips were corroborated by inquiries with 30 customers and 28 transporters, who confirmed receiving goods without Central Excise invoices and transporting the goods mentioned in the slips, respectively. Despite the appellants' plea for cross-examination of these parties, the tribunal found that the evidence was sufficient to link the despatch slips to the Appellant Company.

4. Financial Hardship and Compliance with Section 35F:
The Appellant Company pleaded financial hardship, citing huge losses and an application before the BIFR for declaring it a sick unit. However, the tribunal noted that no orders had been passed by the BIFR, and no credibility could be attached to the company's profit and loss account in a case of large-scale duty evasion. The tribunal directed the Appellant Company to pay Rs. 8,00,00,000/- within eight weeks in addition to the Rs. 40,00,000/- already paid, for compliance with Section 35F. On payment, the requirement of pre-deposit of the balance amount of duty demand, interest, and penalty would be waived, and recovery stayed.

5. Imposition of Penalties on the Managing Director and Employees under Rule 26:
The tribunal found that the Managing Director, Shri Zakir Ali Rana, was actively involved in unaccounted manufacture and sale of excisable goods without payment of duty, attracting the provisions of Rule 26. He was directed to deposit Rs. 10,00,000/- within eight weeks for compliance with Section 35F. However, the tribunal held that the penalties on Shri Dinesh Gupta, Shri Sarfraz Ali, and Shri Neeraj Garg, who were employees acting under the management's directions, were not justified. The requirement of pre-deposit of penalties by these employees was waived, and recovery stayed.

Conclusion:
The tribunal directed the Appellant Company and the Managing Director to make specified pre-deposits for compliance with Section 35F, while waiving the pre-deposit requirements for the employees. The compliance was to be reported on 10/04/2015. The stay applications filed by the employees were allowed. The judgment emphasized the corroborative evidence of duty evasion and the need to safeguard revenue interests.

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