1997 (9) TMI 550 - AT - Central Excise

Clandestine removal - Proof - Evidence - Appreciation of - Expert witness - Precedent - Words and phrases Denierage - Exemption - Pre-oriented yarn - Accountal of goods - Stock taking by Department - Order - Confiscation

Issues Involved:

1. Manufacture and clearance of 119.6 MTs of POY without payment of duty.
2. Misdeclaration of denierage of yarn.
3. Excesses and deficiencies in stock during stocktaking.
4. Manufacture of texturised yarn from non-duty paid POY by other appellants.

Issue-Wise Detailed Analysis:

1. Manufacture and Clearance of 119.6 MTs of POY Without Payment of Duty:

The Director (Anti-Evasion) found that the first appellant could not account for 124 MTs of polyester chips, concluding that 119.6 MTs of yarn were manufactured and cleared without paying duty. The appellant contended that various losses, including pilferage, dust removal, moisture loss, and invisible losses, accounted for the discrepancy. The Director rejected these claims, but the Tribunal found that the appellant's explanations were reasonable and substantiated by affidavits, insurance claims, and expert testimony. The Tribunal concluded that the unexplained shortage of raw material did not justify the conclusion of clandestine manufacture and removal of POY.

2. Misdeclaration of Denierage of Yarn:

The Director alleged that the appellant misdeclared yarn of lower denierage as 755 denier to pay a lower duty. The appellant argued that it described single ply 320 denier yarn as 160/2 to overcome market resistance. The Tribunal noted that most witnesses, upon cross-examination, supported the appellant's claim that there was no practical difference between single ply 320 denier yarn and double ply 160 denier yarn. The Director's reliance on the draw ratio and test reports was found to be unsubstantiated. The Tribunal concluded that the Department did not establish the misdeclaration of denierage.

3. Excesses and Deficiencies in Stock During Stocktaking:

The Director found discrepancies in the stock of POY during stocktaking, with excesses of 4.347 MTs and shortages of 1.946 MTs. The appellant argued that errors occurred due to the involvement of multiple officers and ongoing production and dispatch during stocktaking. The Tribunal acknowledged the possibility of errors but noted that the appellant's officers accepted the stocktaking by signing the panchanama. The Tribunal confirmed the Director's findings but found no material to support deliberate evasion of duty.

4. Manufacture of Texturised Yarn from Non-Duty Paid POY by Other Appellants:

The Director alleged that the other appellants manufactured texturised yarn from non-duty paid POY received from the first appellant. The Tribunal found that the charges against these appellants were not substantiated, as the first appellant was not found guilty of clandestine removal. The Tribunal noted that the appellants offered a plausible defense that the POY was received from Orkay Investment, which was not considered by the Director. The Tribunal concluded that the charges against these appellants were not established.

Conclusion:

The Tribunal ordered the following:

- Demand for duty on 119.60 MTs of POY set aside.
- Demand for duty on 5,58,882.40 Kgs of POY set aside.
- Demand for duty on the quantity of yarn found short during stocktaking confirmed.
- Confiscation of 4,374.73 kgs of POY found in excess during stocktaking and redemption fine confirmed.
- Confiscation of other quantities of POY set aside.
- Penalties imposed set aside.

The appeal E-3598 was allowed in part, and other appeals were allowed.

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