ORDER
Ms. Jyoti Balasundaram
1. In these cases, the Commissioner of Central Excise, Mumbai I has confirmed a total duty demand of Rs. 1,36,81,373/- against the applicant company and imposed a penalty of Rs. 1,71,28,858/- upon the company. In addition, she has imposed penalties of Rs. 50.00 lakhs each on the three directors. She has levied interest of Rs. 97,21,742/-. Out of the total duty demand, an amount of Rs. 97,21,742/- has been confirmed on the ground that the applicant company manufactured and cleared petroleum speciality products without payment of duty under cover of invoices of M/s. J.I.Traders. An amount of Rs. 39,59,631/- has been confirmed on account of modvat credit wrongly availed on inputs not received in the factory of the applicants.
2. The case of the department on the aspect of clandestine removal is mainly based upon documents such as gate register pertaining to the relevant period maintained by the watchman of the applicant company showing receipts and removals in and from the factory premises of the applicants. M/s J.I. Traders is located in common premises with the applicants. The other records, which have been clandestinely removed, are statements of the directors of the applicant company as well as the statement of the production supervisor of the applicant company and further transport companies statements confirming transport of goods without cover of duty paying documents or without bills/challans. The department also relies upon the laboratory register maintained by the chemist of the applicant company. It is the contention of the learned counsel for the applicants that J.I. Traders independently purchased duty paid goods from other manufacturers and proof of such purchase and sale by J.I. Traders had been filed along with the reply to the show cause notice but the adjudicating authority has not considered the same. The learned counsel submits that, if the above contention of the applicants is accepted, the duty demand would get reduced by about Rs. 37.00 lakhs. He further submits that an amount of Rs. 3,35,790/- is in respect of waste/spent fullers earth which is exempted under notification 76/86 dated 10.2.1986. His further submission is that the duty demand would get reduced by further amount of Rs. 11.69 lakhs approx on the basis that the price of the goods is cum-duty price. According to the applicants, if the above three submissions are accepted the demand for the clandestine removal gets reduced by approx Rs. 52.00 lakhs, leaving only a balance of Rs. 46.00 lakhs which has been paid by the applicants even prior to the adjudication.
3. Coming to the demand on account of wrong availment of modvat credit, Mr J.J. Bhat, the learned senior counsel, contends that although inputs were admittedly not received by the applicants at their Bombay factory where credit was taken, the inputs were received by their Gujarat factory and therefore only a technical violation of the modvat rules has taken place and the whole exercise is revenue neutral, in view of the fact that credit has been availed only in respect of inputs received and no excess credit had been availed.
4. On the penalty aspect, he submits that the circumstances of the case do not warrant any imposition of penalty and he therefore prays that they duty demand and penalty may be waived and recovery thereof stayed pending the appeals.
5. Opposing the prayer the learned D.R. Mr Sarkar draws our attention to the finding of the adjudicating authority on the charge of clandestine removal, stating that the cumulative evidence clearly points to clandestine removal, and therefore the demand of Rs. 96.00 lakhs approx has been rightly confirmed. Regarding modvat credit, he submit that the credit is not admissible in the face of the admitted position of non receipt of inputs in the Bombay factory. He also justifies the imposition of penalty.
6. We have carefully considered the rival submissions. The issue of clandestine removal of goods by the applicants is a contentious one and can be considered in detail only when the appeals are taken up for regular hearing and not at this interlocutory stage. Having regard to the payment of Rs. 46.00 lakhs towards duty demand on this score, we accept deposit of this amount as sufficient for the purpose of Section 35F of the Central Excise Act and dispense with the requirement of pre deposit of balance duty. We however do not see any prima facie substance in the applicants’ submission regarding availment of modvat credit and therefore direct pre deposit of Rs. 40.00 lakhs towards duty. We also direct pre deposit of Rs. 10.00 lakhs towards penalty by applicant no.1 (assessee company). Pre deposit is to be made within a period of eight weeks from to day. On such a deposit, pre deposit of balance duty and penalty, both on the company as well as on the directors shall stand waived and recovery thereof stayed pending the appeals. Failure to comply with this direction shall result in vacation of stay and dismissal of the appeals without prior notice.
7. Compliance to be reported on 5.9.01.