2017 (1) TMI 145 - AT - Central Excise

Processing loss - short-receipt of material - job work - demand on the ground that 16% loss is abnormal - Held that - the Revenue could not produce any evidence to show that there is a diversion of input or generation of physical waste and scrap which was cleared clandestinely either by the appellant or by the job worker. The demand on 16% process loss is on the basis of assumption and presumption - The appellant had produced Chartered Engineer certificate wherein it was certified that the process loss in the job work from 16% to 27% - the demand cannot be confirmed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of excise duty on processing loss of raw material sent for job work.

Analysis:
The case involved a dispute regarding the demand of excise duty on a processing loss of raw material sent for job work. The appellant sent raw material to a job worker and received material short to the tune of 16%, citing processing loss. A show-cause notice was issued proposing the demand of excise duty on such loss for a specific period. The adjudicating authority confirmed the demand, leading the appellant to file an appeal before the Commissioner (Appeals), which was rejected.

Appellant's Argument:
The appellant's counsel argued that the job work process generated waste and dust that was irrecoverable, making it impossible for the job worker to return such waste. The appellant provided a Chartered Engineer certificate stating that process loss ranged between 16% to 27%. The counsel contended that the demand was based on an assumption as the department failed to provide evidence of physical waste in scrap arising from the process. The counsel cited various judgments supporting the appellant's case.

Revenue's Argument:
On the other hand, the Authorized Representative for the Revenue reiterated the findings of the impugned order, stating that the demand was rightly confirmed as the 16% loss was considered abnormal.

Tribunal's Decision:
After considering both sides' submissions and examining the records, the Tribunal found that the demand was based on the assumption of abnormal process loss without concrete evidence of diversion of input or generation of physical waste. The appellant's Chartered Engineer certificate supported the claim of process loss, and the Revenue failed to provide contradictory evidence. The Tribunal noted that the demand could not be sustained on the basis of presumption and set aside the impugned order, allowing the appeal in favor of the appellant.

The judgment was pronounced on 02.12.2016 by the Tribunal comprising Mr. Ramesh Nair, Member (Judicial) and Mr. C.J. Mathew, Member (Technical).