2005 (4) TMI 409 - AT - Central Excise

Summary

Issues:
1. Shortage of raw materials - sodium silicate and LAB
2. Imposition of duty and penalty based on shortage
3. Mixing of returned goods with fresh goods
4. Applicability of Rule 173H of the Central Excise Rules, 1944

Analysis:

Issue 1: Shortage of raw materials - sodium silicate and LAB
The case involved a dispute regarding the shortage of raw materials, specifically 5.664 M.Ts. of sodium silicate and 7.934 M.T. of LAB at the factory of M/s. Vishwa Organics Pvt. Ltd. The Central Excise Officers found the shortage during a visit, leading to the confirmation of duty demand and penalty imposition by the Joint Commissioner. The Commissioner (Appeals) upheld this decision, stating that the reasons provided by the company were baseless due to lack of documentary evidence. The company argued that the shortage was due to the officers not considering two batches under process during the stocktaking, and that they were coerced into paying the duty. However, the Tribunal found no grounds to question the shortage findings, upheld the duty demand, and reduced the penalty to Rs. 10,000.

Issue 2: Mixing of returned goods with fresh goods
Another aspect of the case involved the mixing of returned acid slurry with fresh goods by the assessee for reprocessing. The Joint Commissioner imposed duty and penalty for violating Rule 173H of the Central Excise Rules, 1944, which prohibits such mixing. However, the Commissioner (Appeals) overturned this decision, stating that the mixing did not amount to manufacture as the process was continuous and essential. The Revenue argued that the treatment rendered the goods marketable, thus attracting duty liability. The Tribunal noted that the assessee followed the prescribed procedure and that the reprocessing did not violate Rule 173H. It emphasized that the process did not amount to manufacture and was in line with the rules, leading to the rejection of the Revenue's appeal.

Conclusion:
In conclusion, the Tribunal upheld the duty demand and reduced the penalty in the case of raw material shortage, while rejecting the Revenue's appeal regarding the mixing of returned goods with fresh goods. The judgments were based on the adherence to rules and procedures by the assessee, ensuring a fair and neutral revenue outcome in both instances.