In case of clandestine removal, Department not required to establish with clear evidence as assessee deliberately destroyed records and preponderant of evidence is sufficient

 Brief Facts of the case:

The officers of Headquarters (Preventive) of Central Excise Commissioner ate, Coimbatore conducted a road check on 06.03.2001 and intercepted one Matador van bearing registration No. TN 27 E 1854 proceeding from Bhawani to Erode found carrying 11069.30 mtrs. of dyed cotton woven fabrics without valid documents.

The said fabrics valued at Rs.2,49,059/- were seized on the reasonable belief that the same were processed and cleared clandestinely without payment of duty and without central excise documents by the respondent and the van was also seized. Officers conducted series of follow up actions and recorded statements from Shri C. Manikandan, an employee of the respondent company and also visited the respondent unit on the same day and verified the records and clearance of fabrics and delivery challans on 06.03.2001 in the presence of Shri S. Rajasekaran, Managing Partner of the respondent company and recorded his statement and found that respondent not accounted in their production register not raised any invoices for clearance of the goods seized in Transit. The investigating officers after recording statements from various customers of the assessee came to know that it had been the usual practice of the assessee to remove the processed fabrics without accounting and paying the duty.

On completion of investigation, a show cause notice was issued to the assessee proposing demand of central excise duty of Rs. 22,05,090 on the dyed woven cotton fabrics clandestinely removed. also proposed penalty under Rule 25 and under Section 11AC and also demand of interest. Show cause notice also proposes for confiscation of 11069 mtrs. of dyed cotton woven fabrics valued Rs. 2,49,059 seized on 06.03.2001 and demanded duty of Rs. 39,850.

The show cause notice issued by the investigating wing was adjudicated by the Commissioner of Central Excise, Coimbatore who dropped further proceedings in respect of excise duty demanded on the clandestine removal of goods except on 11069.30 mtrs. dyed woven fabrics seized. He confirmed the duty of Rs.39,850 and imposed equal penalty of Rs. 39,850. He also ordered confiscation of the van valued at Rs. 1,50,000/- and ordered fine of Rs. 15,000/- and imposed penalty of Rs. 10,000/- on Shri R. Rajasekaran under Section 38A of the CEA,1944 read with Rule 26 of CER,2001 and imposed a penalty of Rs.5000/- on Shri C.A. Pavun, Driver of the van. CBEC reviewed the said order and Revenue preferred appeal against dropping of proceedings.

Contention of the Assessee:

The learned counsel for the assessee contended that entire case has been made out by the department based on the statements recorded from various persons and no corroborative evidences or witnesses produced except for the seized goods. The statements recorded were also withdrawn subsequently. He disputed the quantity arrived by the department based on the loose sheets and the value adopted by the department is arbitrary on the alleged clearance of processed fabrics and the quantity shown in the work sheet is wrong. The department erroneously indicated excess quantity of 7661.15 mtrs. shown in respect of SCM for 2000-2001. He also submits that excise duty demanded @ 24% for the year 2000-2001 (16%Basic and 8% Additional) whereas the correct rate of duty is 16% (8% BED and 8% ADE). He further submitted that the quantity of clandestine removal to AP & Sons as shown by the department for the year 2000-2001 accounted excess quantity of 10608 mtrs.

Thus, he demanded that the appeal of the revenue to dismissed.

 Contention of the Revenue:

 The learned counsel for the department contended that detailed investigation was carried out by the Preventive wing of the Commissioner ate and detailed statements were recorded from the respondent and other persons.

The buyers of processed grey fabrics – SCM & AP & Sons has confirmed the modus operandi adopted by the respondent for clearance of dyed woven cotton fabrics clandestinely without accounting and without payment of central excise duty. He further submitted that statement by the Managing Partner of the assessee firm Shri R. Rajashekaran clearly admitted the clandestine removal of processed fabrics and he is fully aware of the entire modus operandi.

He further submitted that the entire operation was carried out with intention to evade payment of duty and they ensured that all the documents are destroyed once the transaction is completed. The Commissioner has not taken into consideration the details of processed fabrics received by SCM and AP& Sons and not considered the evidences relied by the department and also white papers bearing the signature of Shri C. Manikandan, employee of the assessee firm where he signed as cash received. White paper also contain the quantity, colour of the processed fabrics. He submits that the department has established beyond doubt. In the case of clandestine removal, Department is not required to establish with clear evidence as the respondent deliberately destroyed the records and preponderant of evidence is sufficient.

 Decision of the CESTAT:

The tribunal after considering the rival submissions observed that revenue filed an appeal against dropping of the proceedings by the Commissioner.

The entire investigation emanated from the seizure of dyed cotton woven fabrics of 11069.30 mtrs. clandestinely removed from the respondents unit without any valid documents and without payment of central excise duty, which is not in dispute.

It was clearly brought out in the investigation that Shri C. Manikandan, an employee of the respondent company had accompanied the said goods for delivery to SCM and his signature was found in the white papers relating to past clearances. The adjudicating authority failed to consider the vital statements recorded from Shri R. Rajasekaran, who voluntarily admitted that the goods under seizure were cleared without accounting and without payment of duty and also admitted that they were supplying the processed fabrics to both SCM and AP & Sons in the past from 1997-98 onwards. He clearly admitted that initially during the period 1997-1998 they used to clear the processed fabrics only on payment of duty under central excise invoices and subsequently due to severe market crunch, suppliers insisted them for processing grey fabrics without payment of duty and they have been forced to processing fabrics without payment of duty and raised invoices only for a limited quantity. He not only admitted that the clearance of processed fabrics without payment of duty and also deposed that approximate quantity of 1000 to 1500 mtrs. of fabrics were processed per day and delivered without payment of duty. He is fully aware of the day to day activities of the respondent unit. Rajasekaran, Managing partner of the respondent unit, which is supported by other statements and records. The adjudicating authority failed to take note of the above statement of Shri R. Rajasekaran, Managing partner of the respondent unit, which is supported by other statements and records. Thus, the demands & penalty raised against assessee is justified.

As regards the plea of the assessee on the wrong adoption of higher rate of duty in respect of the quantity cleared for the year 2000-2001. On perusal of Notification No. 17/2000-CE dated 01.03.2000, the correct rate of duty chargeable is @ 16% (8% BED and 8% ADE) and not 24% (16% BED and 8% ADE) as indicated in SCN. The CESTAT directed lower authority to redetermine the demand.

Thus, the appeal of revenue is allowed.