2003 (2) TMI 521 - Commission - Central Excise

Summary

Issues Involved:

1. Allegations of clandestine manufacture and clearance of rolled steel products.
2. Calculation of duty liability based on furnace oil consumption.
3. Admissibility of job work production and related Modvat credit.
4. Determination of assessable value for duty calculation.
5. Immunity from prosecution, penalty, and interest.

Detailed Analysis:

1. Allegations of Clandestine Manufacture and Clearance:

The main applicant was accused of manufacturing and clearing 11,841 MT of rolled steel products without proper accounting from April 1997 to October 1998, evading Central Excise duty of Rs. 2,30,29,558/-. The main applicant admitted to the clearance of 2038 MT during July 1998 to October 1998 and another 1000 MT subsequently but contested the allegations of clandestine manufacture and clearance.

2. Calculation of Duty Liability Based on Furnace Oil Consumption:

The applicants argued that the consumption rate of furnace oil (FO) should be considered at 63.7 liters per MT as per the report of their consultant, Shri T. Chalam. However, the Commissioner (Inv.) and the Settlement Commission found that the average FO consumption rate of 50 liters per MT, based on historical data and the statement of the Factory Manager, Shri K.M. Yousuf, was more appropriate. The Commission determined that the total unaccounted production during the period was 6961.940 MT, not 3038 MT as admitted by the applicant.

3. Admissibility of Job Work Production and Related Modvat Credit:

The applicant claimed production of 1943.510 MT on a job work basis, which was accepted by the Revenue. The applicant had reversed Modvat credit on the FO used for this job work, but the Commission noted that the jurisdictional officer should verify the correctness of the reversed credit based on the determined FO consumption rate of 50 liters per MT.

4. Determination of Assessable Value for Duty Calculation:

For the period July 1998 to October 1998, the Commission accepted the applicant's plea to treat the value adopted in the SCN as cum-duty value, reducing the duty liability to Rs. 37,31,978/- for 2038 MT. However, for the period April 1997 to June 1998, the Commission did not accept the cum-duty value claim, as the SCN had adopted the value declared by the applicant for duty-paid clearances. The Commission calculated the duty liability on the unaccounted production of 6961.940 MT based on an average assessable value of Rs. 12,730.50 per MT.

5. Immunity from Prosecution, Penalty, and Interest:

The Commission granted immunity from prosecution, penalty, and interest to the main applicant and co-applicants, considering the applicant's efforts to disclose their duty liability and the absence of evidence of financial gain. The total duty liability was settled at Rs. 1,31,34,611/-, with the applicant having already paid Rs. 56,06,978/-. The balance payable was Rs. 75,27,633/-, to be paid within 30 days from the date of receipt of the order.

Conclusion:

The Settlement Commission's order settled the duty liability at Rs. 1,31,34,611/-, with a balance of Rs. 75,27,633/- to be paid by the applicant. Immunity from prosecution, penalty, and interest was granted, subject to the condition that any material particulars withheld or fraudulent means employed in obtaining the settlement could lead to withdrawal of the immunities. The jurisdictional officer was tasked with verifying the correctness of the reversed Modvat credit related to job work production.