2005 (3) TMI 517 - AT - Central Excise

Summary

Issues:
- High process loss in Polyester Fibre
- Demand of duty on unaccounted input
- Imposition of penalties
- Modvat credit availed by appellants
- Appeal against Commissioner (Appeals) order

High process loss in Polyester Fibre:
The case involved the appellants, who manufactured various types of yarn falling under different chapters of the Central Excise Tariff Act, 1985. The Revenue observed a discrepancy in the process loss of Polyester Fibre, which was higher than the industry standard. While the South India Textiles Research Association (SITRA) suggested a loss of 2 to 3%, the appellants reported a loss of 6.3%. Consequently, the Revenue demanded duty on the unaccounted input of Polyester Fibre and imposed penalties. The Commissioner (Appeals) allowed a loss of up to 1%, prompting the appellants to appeal to the Tribunal, arguing that the quality of the fibre directly impacted the waste percentage.

Demand of duty on unaccounted input:
The main contention in the case was the Revenue's claim of duty on the unaccounted input of Polyester Fibre due to the high process loss observed by them. However, the Tribunal noted that there was no evidence linking the abnormal loss to clandestine production or removal of finished products. In the absence of concrete proof or experimental data to ascertain the abnormal losses, the Tribunal deemed the Commissioner (Appeals) order unsustainable. Consequently, the appeals were allowed, and the appellants were granted consequential reliefs.

Imposition of penalties and Modvat credit availed by appellants:
The case did not mention specific details regarding the penalties imposed or the Modvat credit availed by the appellants. However, it was highlighted that the Revenue's demand for duty on the unaccounted input of Polyester Fibre was a significant issue in the appeal. The Tribunal's decision to set aside the Commissioner (Appeals) order based on the lack of evidence linking the process loss to clandestine activities also indirectly addressed the penalties imposed and the Modvat credit availed by the appellants.

Appeal against Commissioner (Appeals) order:
The appellants appealed to the Tribunal seeking to overturn the Commissioner (Appeals) order, which allowed a loss of up to 1% and upheld the Revenue's demand for duty on the unaccounted input of Polyester Fibre. The Tribunal, after careful consideration of the case records, concluded that without evidence of abnormal losses being linked to clandestine activities, the duty demand was not justified. Consequently, the Tribunal allowed the appeals and provided the appellants with consequential reliefs, effectively overturning the Commissioner (Appeals) decision.