2002 (8) TMI 738 - AT - Central Excise

Summary

Issues: Confiscation of unaccounted HDPE granules, demand of duty on prime quality granules, denial of credit, substitution of granules

Confiscation of Unaccounted HDPE Granules:
The case involved the confiscation of 10.500 MT of HDPE granules by Central Excise Officers due to an alleged excess over recorded balance in RG 23A records. The officers suspected that the appellants were substituting prime quality granules with low-quality ones after availing Modvat credit. The Commissioner adjudicated the case, confiscating the raw materials but allowed redemption on payment of a fine. However, the appellate judge found no justification for confiscation as there was no evidence of the appellants taking credit for the duty paid on the inputs in question. The judge highlighted that the goods were seized solely on the assumption of substitution without proper accounting, which was not supported by the records.

Demand of Duty on Prime Quality Granules:
The Commissioner confirmed a duty demand of Rs. 2,73,496/- on 27.000 MT of prime quality HDPE granules, alleging substitution with low-grade granules. Additionally, a penalty under Section 11AC of the Act was imposed. The appellants contested these allegations, stating there was no evidence of substitution and that they had received goods covered by invoices subsequently. The appellate judge noted that the allegations were based on scrutiny of private records without specific mention of which records were considered. The judge found the Commissioner's findings lacking in evidence to support the substitution claims, emphasizing that the order was based on presumption and assumption. Consequently, the judge set aside the duty demand and penalty.

Denial of Credit:
The appellants were also facing denial of credit amounting to Rs. 1,88,447.92, which the Commissioner dropped during adjudication. The judge upheld this decision, accepting the appellants' submission that the credit was rightfully availed upon receiving the goods covered by the invoices.

Substitution of Granules:
The case involved allegations of substituting prime quality HDPE granules with low-grade ones. The Commissioner's order was challenged based on lack of specific evidence supporting the substitution claims. The appellate judge found the order to be vague, lacking reference to particular records or evidence to substantiate the substitution activities. The judge concluded that the order was based on general allegations without concrete support, leading to the appeal being allowed in favor of the appellants with consequential relief.