2007 (7) TMI 462 - AT - Central Excise

Demand - Burning loss - Suppression of facts - Held that - It is seen that entire case was made out on the basis of the record which was modified by the adjudicating authority and, therefore, there is no reason of suppression of facts with intent to evade payment of duty - demand set aside - appeal allowed.

Summary

Issues:
1. Demand of duty on burning loss during the manufacture of finished goods.
2. Justification of the demand of duty based on verification report.
3. Applicability of burning loss percentage and evidence of clandestine removal.
4. Sustainability of demand of duty for the extended period of limitation.

Analysis:
1. The appellant, a manufacturer of iron and steel products, received a show cause notice proposing a duty demand of Rs. 69,68,916/-, penalty, and interest for the period 2001-02 to 2005-06, based on burning loss during manufacture. The Commissioner (Appeals) reduced the demand to Rs. 7,00,301/-, imposing a penalty and interest. The appellant contended that the demand was unsustainable due to burning loss. The adjudicating authority modified the demand based on a verification report, setting the average burning loss at 7%.

2. The central excise officers' study revealed burning loss percentages ranging from 6.21% to 10.54% for different materials. The Tribunal in a previous case allowed a 10% burning loss based on Ministry of Steel guidelines. The appellant argued that there was no evidence of clandestine removal of goods, and the Commissioner's 7% calculation was not justified, citing previous Tribunal decisions. The demand for the extended period was also challenged as unsustainable.

3. After reviewing the record and submissions, the Tribunal found the burning loss percentages during the material period to be mostly around 7%, with negligible variations. The absence of evidence of clandestine removal and the limitation period being exceeded led to the conclusion that the demand of duty was not sustainable. The Tribunal agreed with the appellant's arguments and set aside the impugned order, allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, finding the demand of duty based on burning loss unsustainable due to negligible variations in percentages, lack of evidence of clandestine removal, and exceeding the limitation period. The impugned order was set aside, and the appeal was allowed with consequential relief.