2009 (10) TMI 788 - AT - Central Excise

Summary

Issues:
1. Calculation of duty demand and penalty based on processing loss.
2. Interpretation of the Commissioner's order regarding processing loss calculation.
3. Challenge to the allowance of one percent processing loss.
4. Allegation of shortages due to clandestine removal and its impact on duty demand.

Analysis:
1. The case involved a search at the appellant's factory premises resulting in a duty demand of Rs. 3,57,963/- and a penalty of Rs. 25,000/- for shortages of finished goods. The Commissioner (Appeals) remanded the matter to the Original Adjudicating Authority to consider the processing loss and recalculate the duty demand. The Authority reduced the duty demand to Rs. 2,68,228/-, allowing one percent processing loss only on the stock at the date of visit. Subsequently, the Commissioner (Appeals) directed that the processing loss should be allowed on the opening balance, reducing the duty further to Rs. 2,11,516/- and penalty to Rs. 10,000/-.

2. The appellant's advocate acknowledged that they did not challenge the Commissioner's order regarding the processing loss calculation, which had become final. The advocate argued that allowing only one percent processing loss was unfair due to the factory's closure for two years. However, the Tribunal held that the finality of the Commissioner's order precluded further challenge. The Tribunal emphasized that the calculation of one percent processing loss should be on the opening balance, as per the Commissioner's decision and a previous Tribunal ruling cited by the advocate.

3. The appellant contended that the allowance of one percent processing loss was inadequate, given the factory's extended closure period. The advocate also raised concerns about the show cause notice alleging clandestine removal, which was not upheld. Despite these arguments, the Tribunal upheld the Commissioner's decision on processing loss calculation, emphasizing that the one percent should be applied to the opening balance, not the closing stock as done by the lower authority.

4. The appellant disputed the duty demand based on the allegation of shortages due to clandestine removal, which was not proven. The advocate argued that since the charge of clandestine removal was not upheld, the duty demand should be set aside. However, the Tribunal rejected this argument, stating that the processing loss calculation was the only remaining issue after the finality of the Commissioner's order, and upheld the duty demand as recalculated by the Commissioner (Appeals).

In conclusion, the Tribunal dismissed the appeal, affirming the Commissioner's decision on processing loss calculation and duty demand reduction based on the opening balance.