2002 (8) TMI 534 - AT - Central Excise

Summary

Issues Involved:
1. Removal of PVC pipes without proper accounting.
2. Removal of scrap for conversion without permission.
3. Correlation between raw materials and finished goods.
4. Inquiry regarding Modvat inputs removed to another company.
5. Invocation of the extended period of limitation.
6. Imposition of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Removal of PVC pipes without proper accounting:
The appellants admitted to removing PVC pipes to M/s Flexoflex (FPL) without payment of duty due to inadequate storage space. Both companies are separate legal entities, and no documentary evidence was provided to support the arrangement. The appellants failed to demonstrate that the removed goods were cleared on payment of duty. The lower authority correctly concluded that there was a contravention of Rule 9(1) and Rule 49 of the CE Rules, 1944, making the goods liable to duty.

2. Removal of scrap for conversion without permission:
The appellants admitted to removing scrap for conversion into pipes without obtaining the necessary permission under Rule 57F(3). The contravention of the Rules was evident, and the appellants did not provide acceptable evidence regarding the removal of converted goods on payment of duty. The Commissioner's finding in this regard was upheld.

3. Correlation between raw materials and finished goods:
The appellants claimed a raw material to finished goods ratio of 100:95. However, the records showed removal of raw material and finished goods, with discrepancies in stock accounting. The lower authority's conclusion that correlation between raw material and finished goods was not possible was upheld.

4. Inquiry regarding Modvat inputs removed to another company:
The appellants contended that Modvat inputs were removed on a loan basis and later returned. However, there was no evidence provided to support this claim. The burden of proof was on the appellants, which they failed to discharge. The adjudicating authority's conclusion was upheld.

5. Invocation of the extended period of limitation:
The evidence on record indicated the appellants' mala fide intention in removing goods to FPL without payment of duty. The invocation of the extended period of limitation was deemed correct.

6. Imposition of redemption fine and penalty:
The appellants were levied a redemption fine of Rs. 1,50,000/- on goods valued at Rs. 3,89,620/-, which was considered excessive and reduced to Rs. 75,000/-. The penalty of Rs. 20,00,000/- was also deemed harsh and excessive, and reduced to Rs. 5,00,000/-.

Conclusion:
Except for the modifications in redemption fine and penalty, the impugned order was upheld, and the appeal was dismissed.