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2003 (1) TMI 405 - AT - Central Excise

Issues Involved:
1. Determination of duty on Iron Ore Pellets based on dry weight versus wet weight.
2. Invocation of the extended period of limitation under Section 11A(1).
3. Imposition of mandatory penalty under Section 11AC and interest under Section 11AB.
4. Allegation of contravention of various Central Excise Rules.

Issue-wise Detailed Analysis:

1. Determination of Duty on Iron Ore Pellets Based on Dry Weight Versus Wet Weight:
The appellant, who took over the Visakhapatnam unit of Essar Steel Limited, was engaged in the manufacture of Iron Ore Pellets. The dispute centered on whether the duty should be calculated based on the dry weight or the wet weight of the pellets. The appellant argued that the pellets were weighed dry before being sprinkled with water for pollution control purposes. The department contended that the appellant cleared quantities with moisture content and paid port charges on the draft survey reports without claiming deductions for moisture, implying no moisture deduction was made. The Commissioner found that the appellant's practice of deducting moisture content was not in line with Central Excise Law and that the dry weight method was not applicable under Chapter 26 of the Central Excise Tariff Act, 1985. However, the Tribunal found that the RG-1 accounts maintained on a dry weight basis were not questioned by the Revenue and that the moistening was a transport requirement, not part of the manufacturing process. The Tribunal concluded that duty should be based on the dry weight as recorded in the RG-1 accounts.

2. Invocation of the Extended Period of Limitation Under Section 11A(1):
The Commissioner invoked the extended period of limitation under Section 11A(1) for demanding differential duty, alleging suppression of facts by the appellant. The Tribunal, however, found that the appellant had not suppressed any facts and had disclosed the dispatch of moist pellets in their invoices. The Tribunal noted that the duty was paid based on the total amounts received from buyers on the dry weight of the goods cleared, and there was no evidence of any extra consideration received. Consequently, the Tribunal held that the extended period of limitation was not applicable.

3. Imposition of Mandatory Penalty Under Section 11AC and Interest Under Section 11AB:
The Commissioner imposed a mandatory penalty equal to the amount of duty under Section 11AC and also demanded interest under Section 11AB. Given the Tribunal's findings that there was no suppression of facts, no duty liability on the moisture content, and the bar of limitation, it concluded that there was no cause for penalty or interest as imposed by the Commissioner.

4. Allegation of Contravention of Various Central Excise Rules:
The Commissioner alleged contraventions of Rules 9(1), 52A, 53, 173G, 173F, and 226 of the Central Excise Rules, 1944. The Tribunal found that the appellant maintained RG-1 accounts on a dry weight basis, which was not questioned by the Revenue. The Tribunal also noted that the moistening of pellets was for transportation and pollution control purposes, not part of the manufacturing process. Therefore, the Tribunal did not uphold the allegations of contravention of the aforementioned rules.

Conclusion:
The Tribunal set aside the Commissioner's order, allowing the appeal and concluding that duty should be based on the dry weight of the Iron Ore Pellets as recorded in the RG-1 accounts. The extended period of limitation was not applicable, and there was no basis for imposing penalties or interest.

 

 

 

 

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