2010 (6) TMI 448 - AT - Central Excise

Demand Excess raw material - quantity was excess rejected by both the lower authorities - copper rods are not notified goods under Section 123 of Customs Act and mere finding of slips on the bundles is not enough to show that the goods were illicitly imported - Once the quantity found is in excess and adjudicating proceedings started on the ground that the quantity found is in excess and once this fails, the department cannot start investigation on a new ground and issue another show cause notice after five years - no evidence adduced by the department to show that appellants had received copper rods separately - department to show that if assessee has not supplied the wires someone else supplied the raw material - no receipt of the raw materials has been proved and for the conclusion that finished goods manufactured out of these raw materials, no evidence is available on record - demand for duty cannot be sustained

Summary

Issues:
1. Demand of customs duty on excess quantity of Copper Rods.
2. Demand of duty on goods manufactured from excess copper rods.
3. Res Judicata applicability.
4. Demand of duty on shortage of copper material.
5. Imposition of penalty under Section 11AC.
6. Imposition of penalty on the partner.

Analysis:

Issue 1:
The appellant faced proceedings for the excess quantity of 13353 Kgs. of Copper Rods without evidence of importation. Lower authorities argued improper stock-taking and lack of proof of importation under Section 123 of Customs Act, 1962. However, the excess quantity was disputed, and the presence of slips indicating Korean origin was deemed insufficient to prove illicit importation.

Issue 2:
A fresh show cause notice was issued for demanding duty on goods manufactured from the excess copper rods. The department alleged that the appellant manufactured copper wires from rods of different origins, leading to duty demands and penalties. However, the lack of evidence linking the excess rods to the appellant's manufacturing process weakened the department's case.

Issue 3:
The advocate contended that the second show cause notice was barred by res judicata, citing relevant legal precedents. The judgment highlighted the importance of timely issuance of show cause notices and the need for proper verification of raw material sources before demanding duties.

Issue 4:
Regarding the shortage of 8793.790 Kgs., discrepancies in the Panchnama were raised. While the adjudicating authority questioned the excess quantity, the shortage was acknowledged by the partner, leading to a sustained duty demand. The absence of challenges to the Panchnama further supported the duty demand for the shortage.

Issue 5:
Penalties under Section 11AC were imposed equal to the duty demanded, but the appellants were not given the option to pay within the specified timeframe. Following a Tribunal decision, the appellants were granted the option to pay a reduced amount within 30 days to avoid increased penalties.

Issue 6:
A penalty of Rs. One lakh was imposed on the partner, which was reduced considering the reduced duty demand and lack of substantial evidence supporting illicit removal. The partner's penalty was decreased to Rs. 15,000 due to the revised duty amount and evidentiary considerations.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Ahmedabad covers the various issues raised, legal arguments presented, and the final decisions rendered in the case.