2002 (1) TMI 133 - AT - Central Excise

Tribunal overturns duty demand and penalties, orders re-examination of vital documents and cross-examination for appellants

The Tribunal set aside the Commissioner's decision confirming duty demand and penalties on appellants for allegedly manufacturing and clearing higher ... Demand - Differential duty - Evidence - Clandestine manufacture and removal Issues Involved:1. Alleged manufacture and clearance of higher count yarn than declared.2. Validity of evidence based on private registers and statements.3. Rejection of wrapping register, RG 1 register, invoices, and customers' affidavits.4. Time-barred demands and intent to evade duty.Summary:1. Alleged Manufacture and Clearance of Higher Count Yarn:The Commissioner of Central Excise, Madurai, confirmed the duty demand and imposed penalties on the appellants for allegedly manufacturing and clearing higher count yarn (64s, 65s, and 66s) while declaring them as 62s to pay lower excise duty. The charge was based on documents and statements obtained during a search operation on 14-2-94, which revealed higher counts in the yarn samples tested.2. Validity of Evidence Based on Private Registers and Statements:The Commissioner relied on private registers and statements from employees to conclude that the appellants had manufactured and sold higher counts of yarn. However, the appellants argued that these registers were pre-production records and not indicative of the final product. They contended that the wrapping register, which showed the correct final counts, was not considered. The Tribunal noted that private registers alone are insufficient to corroborate clandestine removal without additional evidence.3. Rejection of Wrapping Register, RG 1 Register, Invoices, and Customers' Affidavits:The Commissioner dismissed the appellants' wrapping register, RG 1 register, invoices, and customers' affidavits without providing reasons. The Tribunal emphasized that these documents should be re-examined as they are crucial for determining the correct counts of yarn produced and cleared. The Tribunal found that the Commissioner did not properly analyze these records and merely relied on private registers and statements.4. Time-Barred Demands and Intent to Evade Duty:The appellants argued that the demands were time-barred and there was no intent to evade duty. They maintained that the test results from samples drawn periodically were in their favor, and there was no evidence of higher counts being sold or higher amounts being received. The Tribunal noted that the Commissioner had scaled down the duty from Rs. 76 lakhs to Rs. 26 lakhs, indicating some benefit of doubt was given. However, the Tribunal found that the matter required re-examination to ensure proper application of the law and principles of natural justice.Conclusion:The Tribunal set aside the impugned order and remanded the matter for de novo consideration. The Commissioner was directed to re-examine the wrapping registers, RG 1 registers, invoices, and customers' affidavits, and to provide an opportunity for cross-examination of witnesses. The re-adjudication should focus on the portion of demands confirmed by the Commissioner, with an open mind and adherence to legal precedents.