2016 (4) TMI 543 - AT - Central Excise

Demand of differential duty - Clandestine removal of goods - Whether the Mill Scale Scrap / burning losses, claimed by the Respondent with respect to conversion of M.S. Ingots to M.S. bars got done from the job workers, is correct or the same should be in the range of 1 to 3% - Held that - There is no evidence on record that any consignment of M.S. Bars, got manufactured from the job workers, was clandestinely diverted by the Respondent. The % age of Mill Scale Scrap / Loss has been clearly reflected in the Job work challans & the same has not been always claimed at more than 10%. Further no authority / study has been quoted by the Revenue to indicate that such Mill Scale Scrap / loss has invariably to be in the range of 1 to 3 %. This has been discussed by the first appellate authority. In the absence of any such evidence contrary to the claim of the appellant Mill Scale Scrap generated during job work can not be held as an evidence of clandestine manufacture & clearance of M.S. Bars. The same can also not be considered as sufficient evidence to demand differential duty from the Respondent. As per the above observation and by relying upon the decision of this bench in the case of CCE Calcutta-II Vs. Murttiwyn Industrial corp. 1995 (5) TMI 152 - CEGAT, CALCUTTA , a charge of clandestine removal can not be said to be established merely on the basis of presumption that normal Mill Scale Scrap / loss is in the range of 1 to 3%. In the absence of any such positive evidence regarding clandestine removal appeal filed by the Revenue is required to dismissed. Bench has not gone into the time barred aspect of the demand as on merits the appeal of the Revenue is not sustainable. - Decided against the revenue

Summary

Issues:
1. Whether the Mill Scale Scrap/burning losses claimed by the Respondent are correct or should be in the range of 1 to 3%.
2. Whether the demand raised by the Revenue based on the assumption of Mill Scale Scrap/loss being in the range of 1 to 3% is justified.
3. Whether the charge of clandestine removal can be established solely on the presumption of normal Mill Scale Scrap/loss being in the range of 1 to 3%.

Analysis:
Issue 1:
The appeal involved a dispute regarding the Mill Scale Scrap/burning losses claimed by the Respondent in the conversion of M.S. Ingots to M.S. bars by job workers. The Revenue argued that the losses were higher than the normal range of 1 to 3%. However, the Respondent provided evidence showing a gradual decrease in losses after making modifications based on advice from the Project Management Cell. The first appellate authority also noted that the job work challans clearly reflected the percentage of Mill Scale Scrap/loss generated, which was not always claimed to be more than 10%. The absence of evidence contrary to the Respondent's claim led to the conclusion that there was no clandestine diversion of goods, and differential duty could not be demanded.

Issue 2:
The Revenue relied on the assumption that Mill Scale Scrap/loss should be in the range of 1 to 3% to raise a demand. However, the Respondent argued that such assumptions were not supported by any scientific authority or evidence. The case laws cited by the Respondent emphasized that clandestine removal cannot be established based on assumptions alone. The Tribunal found that while the Revenue is not required to prove its case with mathematical precision, the demand in this case was solely based on presumptions and assumptions, which was not sufficient to uphold a charge of clandestine removal. Therefore, the appeal filed by the Revenue was dismissed.

Issue 3:
The Tribunal highlighted that the case law cited by the Revenue did not support the establishment of clandestine removal solely on the presumption of normal Mill Scale Scrap/loss being in the range of 1 to 3%. Despite the principle that the Revenue does not need to prove its case with mathematical precision, the lack of positive evidence regarding clandestine removal led to the dismissal of the Revenue's appeal. The Tribunal did not delve into the time-barred aspect of the demand as the appeal was found to be unsustainable on merits.

In conclusion, the Tribunal upheld the order passed by the first appellate authority, dismissing the appeal filed by the Revenue based on the lack of concrete evidence supporting the demand raised on the presumption of Mill Scale Scrap/loss being in the range of 1 to 3%.