2005 (5) TMI 540 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 4/97-CE and 5/98-CE based on the use of fly-ash.
2. Allegations of clandestine removal of Galvanized Corrugated Sheets (GS) without payment of duty.
3. Validity of penalties and interest imposed under Section 11AC and Rule 173Q on M/s. Assam Asbestos Ltd.
4. Involvement of other entities in the clandestine removal and their liability under Rule 209A of the Central Excise Rules, 1944.

Issue-Wise Detailed Analysis:

1. Eligibility for Exemption under Notification No. 4/97-CE and 5/98-CE:
The Department alleged that M/s. Assam Asbestos Ltd. did not use the prescribed quantity of fly-ash in the manufacture of Asbestos Cement Sheets (ACS) and thus wrongly availed the exemption under the said notifications. This conclusion was based on private documents recovered from the assessee's premises, indicating discrepancies between the actual and declared usage of fly-ash. The assessee contended that using less fly-ash would be commercially disadvantageous and that the Department did not consider all relevant factors, such as the quality of fly-ash and the role of other materials like cement and water. The Department also alleged that Bongaigaon Thermal Power Station did not sell fly-ash during the relevant period, which the assessee could not refute with valid evidence. The Tribunal found that the Department's reliance on private documents and hand-written slips by semi-literate workers over statutory records maintained by the assessee was flawed. The Tribunal also noted that the Commissioner ignored statements from senior production managers and other corroborative evidence. Therefore, the duty demands by denial of the notification benefit on ACS sheets were not upheld.

2. Allegations of Clandestine Removal of GS without Payment of Duty:
The Department alleged that M/s. Assam Asbestos Ltd. clandestinely removed approximately 257 MT of Galvanized Corrugated Sheets (GS) without payment of duty, based on private documents and statements from the dispatch officer. The assessee argued that the documents were rough working sheets and not reliable evidence of clandestine removal. The Tribunal found that the Commissioner did not provide a detailed analysis of the entire quantity alleged to be clandestinely removed and that the rough sheets did not specify the number of pieces, thickness, and weights. Therefore, the issue of duty liability on GS sheets required de novo consideration and adjudication, as the charges needed to be established beyond reasonable doubt.

3. Validity of Penalties and Interest Imposed:
Since the duty demands on ACS sheets were not upheld and the duty demands on GS sheets required re-evaluation, the penalties and interest imposed under Section 11AC and Rule 173Q on M/s. Assam Asbestos Ltd. were set aside. The Tribunal remitted the matter for de novo adjudication to determine the penalties and interest liabilities, if any, based on the outcome of the re-evaluation of duty demands on GS sheets.

4. Involvement of Other Entities and Their Liability:
The Department alleged that several other entities were involved in acquiring, possessing, transporting, depositing, removing, keeping, concealing, selling, or purchasing the excisable goods and were thus liable for penal action under Rule 209A of the Central Excise Rules, 1944. The Tribunal did not provide a detailed analysis of this issue in the judgment, as the primary focus was on the duty demands and penalties on M/s. Assam Asbestos Ltd.

Conclusion:
The Tribunal found that the Department's allegations regarding the non-use of prescribed fly-ash and clandestine removal of GS sheets were not sufficiently substantiated. The duty demands on ACS sheets were not upheld, and the issue of duty liability on GS sheets required de novo consideration. Consequently, the penalties and interest imposed were set aside, and the matter was remitted for re-evaluation. The judgment emphasized the need for detailed scrutiny and reliable evidence to substantiate allegations of evasion of duty.

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