2003 (12) TMI 505 - AT - Central Excise

Summary

Issues:
1. Demand of duty and penalty imposed on a company for shortage of finished products during verification.
2. Interpretation of tolerance limit in weight and quantity of products.
3. Invocability of extended period of limitation for duty demand due to alleged clandestine removal of goods.

Analysis:
1. The appeal was filed against the setting aside of duty demand and penalty imposed on a company for a shortage of finished products found during verification. The Commissioner (Appeals) had ruled in favor of the company, stating that the physical verification was not conducted accurately based on the weight of each pipe. The Revenue argued that the shortage was correctly identified and fell outside the tolerance limit. They claimed the extended period of limitation was applicable due to alleged clandestine removal of goods not recorded in the register.

2. The company contended that the weight difference in products was due to using an empirical formula for statutory records and actual weight recording during product delivery. They argued that the shortage was within the tolerance limit specified by ISI standards. Moreover, they challenged the invocation of the extended period of limitation, stating that the show cause notice was issued beyond the normal six-month period.

3. The Tribunal considered both arguments and upheld the demand of duty against the company. They agreed with the Revenue that tolerance limits apply to product weight, not quantity. The Tribunal found that the shortage indicated possible clandestine removal of goods without duty payment. The statements of company representatives supported the verification process, and the show cause notice explicitly alleged clandestine removal, justifying the extended period of limitation. A penalty of Rs. One lakh was imposed on the company, considering the circumstances. The appeal was disposed of in favor of the Revenue, affirming the duty demand and penalty.