2004 (6) TMI 480 - AT - Central Excise

Summary

Issues:
- Appeal against order-in-appeal dropping the demand for duty on Plastic Storage Tanks.
- Exemption under Notification 8/96-C.E. for tanks up to 300 Litres.
- Demand raised due to excess raw material consumption.
- Commissioner (Appeals) decision based on Supreme Court ruling.
- Dispute over maintaining separate records for inputs.
- Contention regarding reversal of credit for exempted goods.
- Dispute over the quantity of inputs found short.
- Evidence provided for waste arising from manufacturing process.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a case where the Revenue challenged the order-in-appeal that dropped the demand for duty on Plastic Storage Tanks manufactured by the respondents. The tanks up to 300 Litres were exempted from duty under Notification 8/96-C.E., subject to conditions. The demand was raised based on the allegation that the respondents consumed excess raw material during a specific period, leading to duty implications. The Commissioner (Appeals) decision, guided by a Supreme Court ruling, favored the respondents as they had reversed the credit for inputs used in manufacturing exempted products. The Commissioner also accepted the respondents' explanation regarding the quantity of inputs found short, citing evidence of waste in the manufacturing process.

One of the key contentions was the Revenue's argument that the appellants failed to maintain separate records for inputs used in manufacturing exempted products. However, the respondents justified their position by highlighting the reversal of credit as per the Supreme Court decision, especially since they produced both exempted and dutiable goods using the same material. The dispute primarily revolved around the quantity of inputs, with the Revenue claiming insufficient credit reversal by the respondents for a specific amount. Despite this, the Tribunal found no merit in the Revenue's argument, given the adherence to the Supreme Court ruling and the absence of evidence disputing the presence of scrap or inputs in the material under processing during the factory visit.

Regarding the remaining demand related to the short quantity of inputs, the respondents successfully demonstrated through evidence that a portion of the material was wasted during the manufacturing process, duly recorded in statutory documents. The Tribunal noted that the factory was operational during the visit, a fact undisputed by the Revenue. Consequently, the impugned order by the Commissioner (Appeals) accepting the respondents' explanation regarding the inputs found short was upheld, leading to the dismissal of the appeal.