2013 (10) TMI 234 - AT - Central Excise

Clandestine remove - estimated production on the basis of consumption of electricity and loose slips towards unaccounted purchase - Held that - Though the show cause notice, mentions the recovery of loose slips from the residential premises showing purchase of 437.58 MT of scrap and also discusses the statement of Shri Anil Kumar Agarwal, wherein he has stated that purchase of this scrap is not accounted for and scrap was used in production MS Ingots cleared clandestinely, the duty demand has not been specifically made in the show cause notice on the basis of alleged unaccounted purchase of 437.58 MT of scrap and its use in the unaccounted manufacture of Ingots - The Commissioner while dropping the duty demand made purely on the basis of the electricity consumption, has confined the confirmation of duty demand based on the paper slips showing unaccounted purchase of 437.58 MT of scrap. - Partial stay granted.

Summary

Issues:
1. Duty demand based on under-reporting of production and unaccounted purchase of scrap.
2. Confirmation of duty demand by the Commissioner.
3. Penalty imposition on the company and directors.

Analysis:
1. The appellant, a manufacturer of MS Ingots, faced duty demands due to shortages in ingots and discrepancies in power consumption. The initial search revealed missing ingots and unaccounted scrap purchases. The duty demands were based on under-reporting of production and unaccounted scrap usage. The Commissioner dropped a portion of the demand related to electricity consumption but confirmed the duty demand for unaccounted scrap usage and shortages in ingots. Penalties were imposed on the company and its directors.

2. The appellant contested the duty demand related to unaccounted scrap purchases, arguing that it was not specifically mentioned in the show cause notice. The Commissioner upheld this demand based on the recovered paper slips showing unaccounted scrap purchases. The appellant sought a waiver of pre-deposit for the remaining duty demand, interest, and penalties. The Tribunal directed the appellant to deposit a specified amount within a given period to proceed with the appeals.

3. The Tribunal considered the submissions from both sides and found that unaccounted scrap purchases were used in production, justifying the duty demand. The appellant was directed to make a pre-deposit to safeguard the revenue's interests. The penalty imposed on the directors was waived for the appeal hearings. The decision aimed to balance the interests of the appellant and the revenue authorities, ensuring compliance with the pre-deposit requirements.