2012 (5) TMI 551 - AT - Central Excise

Duty demand - appellants claim shrinkage of grey fabrics higher than the limit prescribed by the Board vide their Circular dated 9-3-1994 - Held that - Admittedly, apart from the shrinkage, which stands claimed by the respondents to the extent of 12.53%, there is absolutely no other evidence on record to indicate any removal of their final products without payment of duty. In the absence of same, confirmation of demand cannot be upheld - Decided against Revenue.

Summary

Issues:
1. Appeal against the order passed by Commissioner (Appeals) regarding confirmation of demand and penalty imposition.
2. Validity of the claim of shrinkage of grey fabrics exceeding the prescribed limit.
3. Interpretation of Board's Circular dated 9-3-1994 regarding permissible shrinkage percentage.
4. Allegations of clandestine removal and justification for confirmation of demand.
5. Applicability of the Board's order on the Commissioner's decision.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Commissioner (Appeals) concerning the confirmation of demand and penalty imposition. The respondents were involved in manufacturing excisable goods falling under specific chapters of the Central Excise Tariff Act, 1985. The dispute arose due to the claim of shrinkage of grey fabrics exceeding the limit set by the Board's Circular dated 9-3-1994. The original adjudicating authority confirmed demands for two periods, which were later set aside by the Commissioner in de novo proceedings.

2. The Commissioner, in the impugned order, overturned the confirmation of demand and penalty imposition, emphasizing that the demand could only be confirmed based on excess shrinkage. He noted the absence of evidence supporting clandestine removal and reasoned that confirmation of demand solely on the grounds of excess processing loss was unjustified. The Commissioner highlighted the variation in shrinkage levels among different fabrics and stressed that without evidence of clandestine removal, confirming the demand was unwarranted.

3. The Revenue, in their appeal, reiterated the argument based on the Board's Circular dated 9-3-1994, which restricted shrinkage to not exceed 4%. They contended that the Commissioner should not have allowed the respondents' appeal given the binding nature of the Board's instruction. However, the Tribunal found no merit in the Revenue's argument. Despite the respondents' claim of 12.53% shrinkage, there was a lack of any other evidence indicating duty evasion through removal of final products. Without such evidence, the confirmation of demand could not be sustained, leading to the rejection of the Revenue's appeals.

4. The Tribunal's decision rested on the absence of concrete evidence supporting the Revenue's allegations of clandestine removal. The judgment emphasized the necessity of evidence beyond excess shrinkage to justify the confirmation of demand. The Commissioner's decision to set aside the demand and penalty imposition was upheld based on the lack of proof of duty evasion through clandestine removal, despite the higher shrinkage claimed by the respondents. The Tribunal's rejection of the Revenue's appeals underscored the importance of substantial evidence in confirming demands related to excisable goods.