2005 (8) TMI 523 - AT - Central Excise

Demand - Wastage/process loss - Confiscation/redemption fine - Imposition of - Penalty - Quantum of - Remand - Quantification of demand

Summary

Issues Involved:
1. Quantification of production without allowance for wastage and process loss.
2. Treatment of sales realization as cum duty price.
3. Confiscation of goods and imposition of redemption fine.
4. Imposition of penalty on the manufacturer.
5. Imposition of penalties on the Directors of the company.
6. Revenue's appeal for restoration of original duty demand.

Detailed Analysis:

1. Quantification of Production Without Allowance for Wastage and Process Loss:
The main grievance of the appellant, M/s. Standard Pencils Pvt. Ltd., was that the quantification of production was done without considering wastage and process loss. The appellant contended that an allowance for an 8% process loss and 3% wastage would show no clandestine removal. The Tribunal had directed the Commissioner to determine the quantity of eyebrow pencils removed without payment of duty based on the four essential raw materials used. The Commissioner, upon reconsideration, directed the assessee to furnish production data based on raw material consumption norms. The assessee failed to provide evidence for wastage or process loss. The Tribunal agreed with the Revenue that the claims were unsubstantiated and thus could not be allowed, leading to the rejection of the appellant's claim for re-fixation of the quantity and consequent reduction of duty.

2. Treatment of Sales Realization as Cum Duty Price:
The appellant claimed that the duty had been worked out without treating sales realization as cum duty price, asserting that non-duty paid goods' sale price should be treated as inclusive of duty. The Tribunal had previously rejected this claim, and the decision became final since no appeal was filed against it. The Tribunal referenced the Supreme Court's ruling in State of West Bengal v. Hemant Kumar & Ors., which stated that a wrong decision by a court having jurisdiction is as binding as a right one unless superseded by appeals or review. Therefore, despite the apparent merits of the appellant's contention on valuation, no relief was permissible, and this claim also failed.

3. Confiscation of Goods and Imposition of Redemption Fine:
The appellant contested the confiscation of goods seized from different premises and the imposition of a common redemption fine of Rs. 1 lakh. The appellant argued that no duty liability arose for the years 1989-90 and 1990-91, and since there was no finding that these goods were not duty paid, they should not be treated as offending and confiscated. The Tribunal found merit in these contentions, noting that since the seizures occurred towards the end of 1990 and early 1991, and there was no duty demand for those financial years, the consignments could not be held as offending. Consequently, the confiscation and redemption fine were set aside.

4. Imposition of Penalty on the Manufacturer:
The appellant argued for a lower penalty, considering the reduction in duty demand from about Rs. 1.5 crores to Rs. 22.07 lakhs. The Tribunal found no merit in this claim, stating that the clandestine activities and duty evasion were established, justifying the penalty. The amount of Rs. 5 lakhs was deemed neither disproportionate nor excessive relative to the duty evasion determined, leading to the rejection of the appellant's plea regarding the penalty.

5. Imposition of Penalties on the Directors of the Company:
The Directors, S/Shri R.S. Falor and K.K. Falor, appealed against the penalties imposed on them. They argued that Rule 173Q of the Central Excise Rules provided for penalties on the "manufacturer" and not on the Directors. This proposition was supported by the Bombay High Court's decision in S.L. Kirloskar v. Union of India, upheld by the Supreme Court. Additionally, it was contended that, in the absence of specific findings of involvement and responsibility for tax evasion, no penalty could be imposed on them. The Tribunal accepted these appeals, setting aside the penalties imposed on the Directors.

6. Revenue's Appeal for Restoration of Original Duty Demand:
The Revenue appealed against the reduction of the duty demand, seeking restoration of the original amount. The Revenue argued that the assessee had not fully entered the raw materials in their accounts and that the Commissioner erred by considering materials in process. The Tribunal, however, noted that the authenticity of the raw material accounts was a specific issue previously addressed, with the Tribunal finding no allegations of incorrect maintenance. The Tribunal's remand order specifically directed that the quantity be worked out based on raw materials indicated in the accounts. Thus, the Revenue's appeal was rejected as it was not permissible to consider factors beyond the raw material accounts.

Conclusion:
The appeals were disposed of as indicated, with the Tribunal upholding the duty quantification, rejecting the cum duty price claim, setting aside the confiscation and redemption fine, maintaining the penalty on the manufacturer, setting aside penalties on the Directors, and rejecting the Revenue's appeal.