2005 (6) TMI 385 - AT - Central Excise

Summary

Issues Involved:
1. Under-valuation of processed fabrics due to misdeclared weight.
2. Evidence of clandestine removal of processed fabrics in the guise of grey fabrics.
3. Denial of deemed Modvat credit for violation of Notification No. 29/96.

Issue-wise Detailed Analysis:

1. Under-valuation of Processed Fabrics:
The core issue was whether the appellants under-valued processed fabrics by declaring lower weights than actual in the price declarations. The appellants argued that the weight shown in the 'Recipe book' was only an approximate weight and not the actual weight. They contended that the actual purchase price of grey fabrics should be used for valuation when available, as per Circular No. 39/93. The Tribunal found that the weight of yarn per sq. meter is relevant only when the actual purchase price is unknown. The Commissioner's reliance on weight-based valuation without disputing the purchase invoices was deemed illogical. The Tribunal concluded that the differential duty demands based on weight discrepancies were not sustainable.

2. Evidence of Clandestine Removal:
The appellants were accused of clandestinely removing processed fabrics under the guise of grey fabrics returned. The Tribunal noted that there was no concrete evidence or corroborative statements to support this allegation. The Commissioner's reliance on conflicting statements and the 'Recipe book' was found to be flawed. The Tribunal emphasized that discrepancies in weight found during investigations were not sufficient to prove clandestine removal. The release of detained fabrics without finding any discrepancies further weakened the case against the appellants.

3. Denial of Deemed Modvat Credit:
The deemed Modvat credit was denied based on the alleged evasion of duty. Since the Tribunal did not uphold the findings of under-valuation and clandestine removal, the denial of deemed credit was also not justified. The Tribunal highlighted that the condition in Notification No. 29/96, which prohibits deemed credit in cases of duty evasion, was not applicable as no evasion was proven.

Conclusion:
The Tribunal found that the allegations of under-valuation and clandestine removal were not substantiated by reliable evidence. Consequently, the demands for differential duty and denial of deemed Modvat credit were set aside. The penalties imposed on the appellants were also nullified. The appeals were allowed, and the order was pronounced in the open court on 31-7-2005.