2007 (7) TMI 219 - AT - Central Excise

Quantities mentioned in the private records were found higher than those mentioned in invoices in respect of other items of fireworks, either no quantity was mentioned in private records or a lesser quantity was mentioned therein as compared to invoices - held that the entire quantity of fireworks mentioned in the private records was liable to be added to the total quantity in the invoices to arrive at the aggregate value of clearances for the purpose of the relevant SSI Notification 1/93

Summary

Issues:
1. Differential duty and penalty demand on the assessee.
2. Challenge of duty and penalty on merits and limitation.
3. Calculation of duty and penalty by the original authority and Commissioner (Appeals).
4. Reliability and assessment of private records for evidentiary purpose.
5. Calculation errors in determining duty amount and imposition of penalty.
6. Decision on the appeals and remand for further proceedings.

Analysis:

1. The judgment involves two appeals, one by the assessee and the other by the Department, regarding the demand of a differential duty of Rs. 1,20,360 and penalty under Section 11AC of the Central Excise Act. The assessee, engaged in fireworks manufacturing, had discrepancies in quantities between private records and invoices for the period of August to October 1996.

2. The assessee challenged the duty and penalty on grounds of merits and limitation. The original authority added all quantities from private records to invoiced quantities for duty calculation. The Commissioner (Appeals) reduced the duty liability to Rs. 11,570 and penalty accordingly, considering discrepancies in private records for different varieties of fireworks.

3. The Commissioner (Appeals) calculated duty at 5% on the excess value of clearances, deviating from the original authority's 8% calculation. The appellate authority's approach in assessing private records was different, considering only higher quantities and ignoring smaller or nil entries, leading to a reduced duty and penalty.

4. The reliability and assessment of private records for evidentiary purposes were scrutinized. The original authority accepted higher entries but ignored smaller or nil entries, which was deemed inconsistent. The statement from the Power-of-Attorney holder acknowledging the records was considered, but the assessment of entries should have been more consistent.

5. Errors in duty calculation and penalty imposition were noted. The duty amount should have been calculated at 8% according to the relevant notification, resulting in a higher liability than Rs. 11,570. The imposition of penalty equal to duty without discretion was deemed unnecessary, and the quantum of penalty should be determined by the original authority.

6. The judgment set aside the impugned order and allowed both appeals by way of remand. The assessee was granted a reasonable opportunity to be heard on the penalty-related issue, emphasizing the need for a correct quantification of duty and a more discretionary approach to penalty imposition in the case.