2015 (4) TMI 736 - AT - Central Excise

Manufacturing company appeal dismissed, Director's penalty reduced to Rs. 1,00,000. Tribunal stresses deterrence in tax evasion.

The appeal of the manufacturing company was dismissed, and the penalty on the Director was partly allowed with a reduction to Rs. 1,00,000/-. The Tribunal ... Clandestine removal of goods - Duty evasion - Goods removed by the appellant-Company without issue of invoice and without payment of duty - Suppression of production - Imposition of penalty on director of company - Held that:- Recovery of the loose sheets and pencil written ledger from the premises of the appellant in the course of search proved the entries therein as representative of the clandestinely removed goods which were well within the knowledge of the appellant. Active involvement of appellant in that regard came to record since those materials were in the custody of the appellant. It is common sense that the materials having utility to the possessor thereof are only possessed by him. He proves ownership thereof and is answerable to the contents therein. Entries on such incriminating materials demonstrated clandestine clearance of 562.130 MT of Sponge Iron and 887.560 MT of such goods respectively well explained by appellant. That also proved clandestine removal of 81.010 MT of Dolochar by the appellant. The statement recorded from shift supervisors being self speaking cannot be brushed aside because they were the persons within whose knowledge goods were manufactured and cleared. Their evidence was believable, cogent and credible for the reason that they vividly described methodology of production. - Preponderance of probability was against the appellant. Pleading of no statement recorded from buyer, no excess electricity consumption found, no raw material purchase found unaccounted and no input output ratio prescribed by law is of no use to it. Revenue discharged its onus of proof bringing out the allegation in the show-cause notice succinctly. But, the appellant miserably failed to discharge its burden of proof. It did not come out with clean hands.- It is not only one evidence, but multiple echoed evidence demonstrated oblique motive of the appellant and proved its malafide. Therefore, appellant fails on all counts. Revenue s investigating was successful and its suffering was established. Without human intervention evasion does not occur by an artificial person which is a company - Thus burden of Revenue was considerably lightened by preponderance of probability. Sri Sanjay Agarwal, Director, showed his knowledge about possession of various incriminating evidence by the company. That demonstrated the methodology of evasion - However, penalty on director is reduced - Decided against the assessees. Issues Involved:1. Excise Duty Demand and Penalty on Manufacturing Company2. Imposition of Penalty on the Director of the Manufacturing CompanyIssue-wise Detailed Analysis:1. Excise Duty Demand and Penalty on Manufacturing Company:The Excise Duty demand of Rs. 25,17,024/- arose on four counts against the manufacturing company-appellant, followed by an equal amount of penalty under section 11AC of the Act and the levy of interest. The investigation revealed several discrepancies:(i) Stock Discrepancy: During a visit by Central Excise officers on 04.10.2006, it was found that there was a shortage of 2.580 MT of sponge iron compared to the stock register, leading to the seizure of records for further scrutiny.(ii) Unaccounted Removal of Goods: Loose sheets recovered from the factory indicated the removal of 562.130 MT of sponge iron and 81.010 MT of Dolochar without invoices and payment of duty.(iii) Suppressed Production: Statements from shift supervisors and scrutiny of records revealed the suppression of 1580.950 MT of sponge iron production.(iv) Unmatched Ledger Entries: A pencil-written ledger indicated unaccounted sales of 887.560 MT of sponge iron. These entries did not match with the Central Excise invoices, confirming clandestine removal.(v) Transporter's Evidence: Statements from transporters and seizure of bilty books confirmed the removal of 69.180 MT and 55.855 MT of sponge iron without Central Excise invoices.(vi) Broker's Records: Records from a broker confirmed the removal of large quantities of excisable goods without payment of duty.The appellant-company had deposited basic excise duty amounting to Rs. 21,59,770/- and education cess of Rs. 43,195/- prior to adjudication. However, the appellant argued that the adjudication order merely replicated the show-cause notice and that the statements from shift supervisors were inadmissible. They contended that there was no evidence of unaccounted raw material purchase, excess electricity consumption, or unaccounted labor payment.2. Imposition of Penalty on the Director of the Manufacturing Company:A penalty of Rs. 5,00,000/- was imposed on the Director of the manufacturing company. The Director's statement admitted the clandestine removal of goods without invoices and agreed to pay the duty. The investigation revealed that the Director had knowledge of the incriminating evidence and the methodology of evasion.Judgment Analysis:The Tribunal analyzed the evidence and submissions:For the Manufacturing Company:- Evidence of Clandestine Removal: The recovery of loose sheets and pencil-written ledger from the appellant's premises demonstrated the clandestine removal of goods. The transporters' records corroborated the unaccounted clearances.- Statements from Supervisors: The statements from shift supervisors were considered credible as they described the production methodology and corroborated the evidence of unaccounted goods.- Director's Admission: The Director's admission of clandestine removal and agreement to pay duty further substantiated the Revenue's case.- Preponderance of Probability: The Tribunal held that the preponderance of probability was against the appellant. The appellant failed to discharge its burden of proof, and the Revenue successfully established the case of evasion.For the Director:- Penalty Justification: The Tribunal noted that evasion does not occur without human intervention. The Director's knowledge of the incriminating evidence and methodology of evasion justified the penalty.- Penalty Reduction: Considering the duty demand faced by the appellant-company, the penalty on the Director was reduced to Rs. 1,00,000/- as a preventive measure.Conclusion:The appeal of the manufacturing company was dismissed, and the penalty on the Director was partly allowed with a reduction to Rs. 1,00,000/-. The Tribunal emphasized the gravity of tax evasion and the necessity of deterrent measures to prevent such offenses.