2016 (1) TMI 1241 - AT - Central Excise

100% EOU - N/N. 52/2003-Cus. dated 31.3.2003 - The appellants have made use of aluminium ingots both imported as well as procured indigenously and sent them to job workers for converting the same into aluminium castings which were used in the further manufacture of automobile parts. During the course of production of automobile parts, aluminium scrap is generated - In respect of scrap generated beyond the norms of 6% in the impugned order customs as well as excise duty have been demanded in respect of quantum of ingots proportional to the excess quantum of scrap generated. Whether such excess exemption is to be ignored or whether the duty is to be demanded on the portion of aluminium ingots lost in such excess wastage? Held that - the quantum of ingots which has been consumed towards wastage beyond the norm of 6% is to be considered as utilised beyond the scope of the permission for procurement of duty free inputs. However, since absolutely no evidence of diversion or suppression is on record, I find it difficult to sustain the charge of suppression and invoking the extended time limit for demand of such duty - All the demands are to be paid along with interest. In the absence of any suppression, there is no justification for imposition of penalty and the same are set aside. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Duty demand on excess aluminium waste claimed by the appellant.
2. Applicability of norms for wastage in the production process.
3. Allegations of suppression of facts and extended time limit for demand of duty.
4. Imposition of penalty in the absence of suppression.

Analysis:
1. The appellant, a 100% EOU manufacturing aluminium automotive components, faced duty demands under four show cause notices for excess aluminium waste claimed. The appellant imported aluminium ingots duty-free for conversion into castings at a job worker's premises. The appellant claimed more waste than admissible, leading to a duty demand of ?27,67,261. The Tribunal found the appellant contravened customs provisions and Foreign Trade Policy, not paying duty on excess waste from 2003 to 2005.

2. The appellant argued that the waste generated during production exceeded norms due to losses, not diversion. The appellant contended that the full utilization of ingots in casting production should negate duty demands. The Development Commissioner's norms allowed 6% wastage, but the appellant's wastage ranged from 9.37% to 9.98%. The Revenue demanded duties on excess wastage above the norm, disputing the appellant's claims.

3. The Tribunal observed no evidence of ingot diversion, indicating full utilization for production. However, wastage exceeding the 6% norm was deemed beyond duty-free input procurement scope. The Tribunal found no suppression or diversion, limiting demands from two show cause notices within the normal time frame. Demands from other notices were upheld, with interest payable. No penalty was justified due to the absence of suppression.

4. In conclusion, the Tribunal remanded the case to the adjudicating authority for demands falling within the normal time limit. Demands from certain notices were upheld, while penalties were set aside due to the lack of evidence supporting suppression. The judgment highlighted the importance of adherence to norms in duty-free input utilization and the necessity of evidence to support duty demands and penalties.