2006 (1) TMI 409 - AT - Central Excise

Summary

Issues:
- Duty demand against the manufacturer of craft paper
- Contention regarding delay in payment of duty
- Allegation of suppression of receipts of raw materials and production
- Irregular utilization of Modvat credit
- Disputed duty demands and penalties

Analysis:
1. The duty demand against the manufacturer of craft paper amounted to over Rs. 27 lakhs, with specific split-ups for various violations. The appellant contested the duty demand at S. No. 1, citing financial difficulties causing a delay in payment, although they had entered all production and clearance in statutory books. An amount of Rs. 9,25,000 had already been deposited, which was not disputed. The Tribunal confirmed the duty demand at S. No. 1.

2. Regarding the duty demand at S. No. 2, based on allegations of suppressing receipts of raw materials and production, the appellant argued against a pro-rata projection of unaccounted waste paper receipts. They contended that duty demand should only be for likely production of craft paper from the unaccounted quantities of waste paper, which amounted to Rs. 3,81,360. The Tribunal upheld the duty demand at S. No. 2 to the extent of Rs. 3,81,360.

3. The third issue involved irregular utilization of Modvat credit amounting to over Rs. 5 lakhs, specifically related to soda ash. The appellant maintained that soda ash was a recognized input in craft paper making, supported by statutory records and industry practices. The Tribunal found the denial of Modvat credit on soda ash baseless and set aside the demand under this heading.

4. The Tribunal confirmed duty demands under S. No. 1 and 4, reduced the duty demand under S. No. 2 to Rs. 3,81,360, and set aside the Modvat credit demand under S. No. 3. In terms of penalties, the Tribunal justified the imposition based on findings of clandestine production and removal, reducing the penalty to Rs. Four lakhs on the manufacturer. The penalty on the Director of the Company was set aside due to lack of special circumstances warranting separate penalty.

5. Ultimately, both appeals were ordered in accordance with the above decisions, providing detailed reasoning for each issue addressed in the judgment delivered on 30-1-2006.