2006 (2) TMI 453 - AT - Central Excise

Summary

Issues Involved:
1. Duty demand on copper scrap sent to job worker without payment of duty.
2. Duty demand based on entries in a Note Book indicating clandestine dispatches of goods.
3. Duty demand due to shortage found on stock verification.

Analysis:

Issue 1: Duty demand on copper scrap sent to job worker without payment of duty
The appellant, a manufacturer of copper pipes and tubes, faced a duty demand of about Rs. 24 lakhs for dispatching copper scrap to its job worker without paying duty. The scrap was generated during the manufacturing process, sent to the job worker for melting and extruding into tubes, and then reused by the appellant as inputs. The Tribunal held that duty was payable on the scrap sent to the job worker. The appellant argued that their duty-free dispatches under Rule 57F of the Central Excise Rules were correct, citing a precedent from Wyeth Laboratories Ltd. The Commissioner (Appeals) had previously ruled in favor of the appellant in a similar dispute. Consequently, the Tribunal set aside the duty demand related to the copper scrap.

Issue 2: Duty demand based on entries in a Note Book indicating clandestine dispatches of goods
Another duty demand of about Rs. 7.5 lakhs was imposed based on entries in a Note Book recovered from the appellant's premises, suggesting clandestine dispatches of goods. The appellant contended that the entries were not related to clandestine activities but rather to legitimate despatches and receipts of goods, which were reflected in duly paid clearances. Despite discrepancies in the explanation provided, the Tribunal examined the entries, explanations, and findings of the Commissioner. It was noted that the entries did not indicate clandestine activities, with specific instances like the export to Foong Seng Hardware, Singapore, being legitimate transactions. Consequently, the duty demand based on alleged clandestine removal was deemed unsustainable.

Issue 3: Duty demand due to shortage found on stock verification
The third duty demand of Rs. 1.3 lakhs was attributed to a shortage discovered during stock verification. The appellant argued that the shortage was due to discrepancies and not clandestine activities, and they had already paid the duty involved. The Tribunal confirmed the duty demand related to the stock discrepancy but ruled out imposing a penalty, stating that minor discrepancies during stocktaking were common, and penalties were not warranted under the Central Excise Rules for such instances.

In conclusion, the Tribunal set aside duty demands and penalties related to the copper scrap dispatch and alleged clandestine removal. The duty demand stemming from the stock discrepancy was upheld, but no penalty was imposed. Additionally, a personal penalty imposed on the Director of the company was also set aside since penalties on the assessee had been revoked.