1996 (5) TMI 284 - AT - Central Excise

Tribunal affirms penalty for manufacturing and clearing dutiable goods, supported by seized evidence

The tribunal upheld the Collector's decision, finding that BPI had manufactured and cleared dutiable goods surreptitiously. The evidence from seized ... Medicines - Exemption in Notification No. 161/66-C.E. - Clandestine removal Issues Involved:1. Reliance on the contents of the seized diaries.2. Evidence of surreptitious removal of goods.3. Relationship between Bright Pharmaceuticals Industries (BPI) and Bright Pharmaceuticals Distributors (BPD).4. Time-bar claim.5. Availability of Notification No. 161/66.6. Seizure of excess goods.Issue-wise Detailed Analysis:1. Reliance on the contents of the seized diaries:The department's claim was based on two red diaries seized from BPI's premises, asserting they recorded actual production. The appellants argued these diaries only contained production plans. Examination of the diaries revealed entries indicating actual production activities, such as 'finished' and 'semi-finished' products, and specific production processes with durations. The statement of Mr. Jore, the diary's author, confirmed the entries were of actual production. Attempts to discredit Mr. Jore's statement were deemed unconvincing, and the entries were accepted as evidence of actual production.2. Evidence of surreptitious removal of goods:The department argued that the difference between the production recorded in the diaries and the statutory RG 1 Register indicated surreptitious removal of goods. Annexure 'A' to the show cause notice showed batch-wise production discrepancies, with the excess being cleared by BPD. The appellants' claim that these were rejected goods resold by BPD was found illogical due to the high volume and value of such goods. The exact correlation between production and sales by BPD further corroborated the department's claim of surreptitious removal.3. Relationship between BPI and BPD:Evidence showed no distinction in the management of BPI and BPD. Statements from Jagmohan Rai Agarwal and Rahul Agarwal indicated shared administrative functions and premises. The administrative office of BPD was in BPI's factory, and their godown was at Jagmohan Agarwal's residence. The Collector's belief that BPD was a dummy unit of BPI was supported by substantial evidence, including shared invoices and lack of separate accounting for goods.4. Time-bar claim:The department argued that essential elements of conspiracy between BPI and BPD were well established in the show cause notice, justifying the demand despite the time-bar claim. The tribunal found that the evidence supported the department's position.5. Availability of Notification No. 161/66:The appellants claimed the benefit of Notification No. 161/66, which prescribes duty calculation based on a price list submitted to the Drug Controller. However, the appellants admitted they had not filed such a list, making them ineligible for the notification's benefits. The tribunal upheld the Collector's decision on this ground.6. Seizure of excess goods:The appellants did not contest the seizure of excess goods valued at Rs. 415, which were confiscated with an option for redemption on payment of a fine.Conclusion:The tribunal found the Collector's belief that BPI had manufactured and cleared dutiable goods surreptitiously was well-founded. The evidence, including diary entries, corroborative sales records, and the intertwined operations of BPI and BPD, substantiated the department's claims. The penalty imposed was deemed appropriate given the value of the goods cleared. The appeal was rejected, affirming the lower authority's decision.