1989 (2) TMI 419 - AT - Central Excise

Issues Involved:

1. Non-accountal of raw materials (caps, glass shells, tungsten filaments).
2. Quantum of breakages and losses in manufacturing.
3. Discrepancies in stock positions and bank statements.
4. Alleged excess sales of bulbs on invoices.
5. Comparison of electricity consumption vis-a-vis production.
6. Allegation of clandestine removal of goods.

Issue-wise Detailed Analysis:

1. Non-accountal of raw materials:

The appellants were found to have purchased caps for bulbs without maintaining the required accounts. They contended that they were unaware of the requirement to maintain accounts for caps, as they only maintained accounts for glass shells, which were declared as the principal raw material. This was considered a technical omission without malafides. Additionally, the appellants did not account for 5460 kgs of glass shells, which were deemed unfit for use upon inspection. The Collector concluded that the appellants should have accounted for these shells and sought their destruction, indicating malafide intentions.

2. Quantum of breakages and losses in manufacturing:

The department alleged that the appellants had a higher quantum of losses (31% to 33%) than the acceptable norm (10%-20%). The appellants argued that as a small-scale unit, their losses were higher due to semi-automatic machines and transit losses. They provided evidence from similarly placed small-scale units showing losses ranging from 20% to 40%. The Collector allowed only 20% towards breakages and demanded duty on the rest. The Tribunal found that the evidence provided by the appellants remained unrebutted and that the Collector's findings were not legally proper and appeared arbitrary.

3. Discrepancies in stock positions and bank statements:

The appellants were found to have discrepancies between their stock positions in the accounts books and the statements furnished to the bank. The appellants explained that the bank statements included goods in process and raw materials for which payments had been made but were yet to be received. The Tribunal found that the Collector did not fully consider the explanations provided by the appellants.

4. Alleged excess sales of bulbs on invoices:

The department alleged that the appellants sold more bulbs on invoices than were shown on gate passes. The appellants explained that they had a duly paid godown from where goods were sold on an old invoice. This explanation was not considered by the Collector. The Tribunal found that the evidence provided by the appellants in the form of an invoice covering sales from the duly paid godown remained unrebutted.

5. Comparison of electricity consumption vis-a-vis production:

The department alleged suppression of production based on a fall in production vis-a-vis increased electricity consumption. The appellants explained that they had sub-let part of their factory to another unit, and the rent included electricity consumption. The Tribunal found that this explanation remained unrebutted and that the Collector did not critically consider this factor.

6. Allegation of clandestine removal of goods:

The Collector concluded that there was clandestine removal based on various factors, including the non-accountal of raw materials and higher percentage of losses. However, the Tribunal found that the Collector did not fully consider the explanations provided by the appellants and that the demand of duty was not sustainable. The Tribunal set aside the demand of duty but upheld the imposition of a penalty for non-accountal of raw materials and non-maintenance of prescribed records, reducing the penalty from Rs. 10,000 to Rs. 5,000.

Conclusion:

The Tribunal found that the Collector's conclusions were not legally proper and appeared arbitrary. The demand of duty was set aside, but the penalty for non-accountal of raw materials and non-maintenance of prescribed records was upheld, with a reduction in the amount. The appeal was disposed of in these terms.

← Previous Next →