2009 (3) TMI 679 - AT - Central Excise

Issues Involved:
1. Classification of Insan-LE.
2. Seizure and confiscation of goods.
3. Calculation of condonable loss.
4. Demand of duty based on shortages and excesses.
5. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Classification of Insan-LE:
The case initially revolved around the classification of Insan-LE. The Tribunal had previously remanded the matter to determine the exact classification, which was ultimately decided to be under CTH 2710.21 as ATF instead of motor spirit under CTH 2710.19. This classification impacted the demand of duty for the period preceding the show cause notice dated 3-3-87.

2. Seizure and Confiscation of Goods:
During the visit on 9-9-86, officers found shortages and excesses in the stock of finished excisable goods, leading to the seizure of excess goods under the reasonable belief that they were liable for seizure. The Tribunal noted that the goods seized could not be confiscated as it could not be concluded that they were not recorded with the intention to evade duty. At best, this could be treated as an irregularity in maintaining statutory accounts, making the provisions of Section 173Q inapplicable.

3. Calculation of Condonable Loss:
The Commissioner allowed a loss to the extent of 1% as evaporation loss but limited it to the percentage of quantity found on the date of the officers' visit. The Tribunal found this method incorrect, stating that evaporation takes place over the entire period, not just based on the stock present on the inspection date. The proper method should consider the opening balance and production figures to calculate condonable loss, excluding clearance figures. This issue was remanded to the Commissioner for a fresh decision.

4. Demand of Duty Based on Shortages and Excesses:
The Tribunal observed that the Commissioner should consider whether the loss was due to evaporation and condonable within the limit of 1%. The demand of Rs. 22,174/- for Insan-LE found illicitly manufactured and cleared was contested by the appellants, arguing that the extended period could not be invoked. However, the Tribunal found no observation in its previous order to support this claim. The demand of Rs. 1,83,247.48 arose due to the reclassification of Insan-LE and was limited to the six months preceding the show cause notice. This aspect required verification and confirmation by the Commissioner.

5. Imposition of Penalty:
The Tribunal noted that no single instance of removal was detected to establish fraudulent conduct by the assessee. Therefore, the intention to evade duty could not be attributed, and at best, it could be considered as incorrect maintenance of accounts liable to penalty under Rule 226. The penalty under Rule 176 and Rule 173 of Central Excise Rules, 1944, was upheld, with no interference warranted.

Conclusion:
The appeal was disposed of by remanding the matter to the Commissioner to rework the condonable loss and verify the correctness of the demand of Rs. 1,83,247.48. The appellants were to be given an opportunity to present their case if they desired.

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