2017 (1) TMI 790 - AT - Central Excise

Clandestine Removal - suppression of facts - validity of SCN - is the achieving of production more than double of the installed capacity possible? Held that - on perusal of SCN, it was found that against installed capacity of 600 MT per annum or 1400 MT for 28 months, achieving production of 2015.788 MT is an impossibility. Thus, I am satisfied that the Show Cause Notice is based on imaginary and illusive data and/or based on misreading of the documents of the appellant and have got no legs to stand. Accordingly, I hold the Show Cause Notice is untenable and impugned order set aside - the appeal is allowed in part and remanded Adjudicating Authority for the limited purpose of recalculation of duty, during that time, or period in dispute, on clearances, as per returns - appeal allowed by way of remand.

Summary

Issues:
1. Clandestine manufacture and removal of product by the Assessee/Manufacturer of Kraft Media Paper.
2. Liability of the appellant to pay duty at different rates as per specific notifications.

Issue 1: Clandestine Manufacture and Removal:
The appellant, a Small Scale Industry registered with the District Industry Center, was accused of clandestine activities based on an inspection revealing discrepancies in stock levels. The Revenue alleged suppression of production and clandestine clearance of paper, resulting in duty evasion. The appellant contested, citing regular filings, approvals, and exemptions claimed under specific notifications. The appellant argued that discrepancies were due to clerical errors, denied clandestine activities, and highlighted impossibility of exceeding production capacity. The Commissioner rejected contentions, considering seized records and lack of satisfactory explanations for excess stock. Observations on Challan Books, gate pass records, and private registers led to a demand for duty payment and penalties imposed.

Issue 2: Liability for Duty Payment under Specific Notifications:
The appellant claimed entitlement to SSI Exemption under Notification No. 175/86-CE, which was contested by Revenue due to alleged suppression and clearance activities. The appellant argued against the extended period of limitation, citing regular filings and explanations for discrepancies. The Commissioner upheld the demand for duty payment, considering records, and dismissed contentions on idle time and clerical errors. The appellant's plea that private records were not conclusive proof of clandestine activities was rejected. The demand for duty payment was reduced and confirmed, penalties imposed, and confiscation ordered. The appellant challenged the order, asserting the impossibility of achieving production levels claimed by Revenue and contesting the validity of the Show Cause Notice based on alleged illusory figures.

The Tribunal reviewed the case, analyzing production and clearance data provided by the Revenue. The calculations showed discrepancies between claimed production levels and actual capacity, leading to the conclusion that the Show Cause Notice was based on imaginary data. The Tribunal found the Notice untenable and set aside the impugned order, granting the appellant consequential benefits. The appeal was allowed in part, remanding the case to the Adjudicating Authority for recalculation of duty on clearances during the disputed period.

*(Dictated and pronounced in Court)*