2017 (7) TMI 401 - AT - Central Excise

Clandestine removal - extra filling of material in the tubes - Held that - learned adjudicating authority has given detailed findings considering all aspects in the process of manufacturing, probability of variations in the quantity shown in the Laboratory records and Excise records and come to the conclusion that there is no case of removal of goods without payment of duty. he adjudicating authority has taken too much pain for concluding that there is no case of evasion of duty on the ground that the difference between the lab reports and Excise reports is not due to excess production and clearance of production without payment of duty but due to manner of process of manufacturing. The adjudicating authority also come to a conclusion that there is no independent evidence put forth by the department to establish any clandestine removal - Even the department accepts the different of production recorded in Excise records and Lab records but did not adduce any evidence that there is excess production and the same was cleared without payment of duty. In absence of any evidence on clandestine removal even if there is a difference between the two records of the appellants the clandestine removal cannot be concluded only on that basis - demand set aside. As regards the other 3 appeals bearing No. E/202/08, E/203/08 and No. E/762/08 these are related to refund claim of the duty paid by the appellant on the difference of quantity of Excise records and Lab records. Therefore the refund is consequential to the demand case which was decided in E/201/08 and E/167/09. All the 3 appeals deserve to be remanded to the adjudicating authority for reprocessing the refund. Appeal allowed in part - part matter on remand.

Issues Involved:
1. Allegation of suppressed production and non-payment of Central Excise duty.
2. Discrepancy between production records (Lab records vs. Excise records).
3. Clandestine removal of goods.
4. Refund claims related to duty paid on the differential quantity of goods.

Issue-wise Detailed Analysis:

1. Allegation of Suppressed Production and Non-Payment of Central Excise Duty:

The appellants were accused of not properly accounting for actual production, leading to non-payment of Central Excise duty. The adjudicating authority initially dropped the proceedings, but the Commissioner (Appeals) reversed this decision, leading to the current appeal. The appellants contended that the difference in production records was due to variations in filling tubes, not clandestine removal.

2. Discrepancy Between Production Records (Lab Records vs. Excise Records):

The primary issue was the discrepancy between the production shown in Lab records and Excise records. The adjudicating authority found that the discrepancy was due to the nature of the manufacturing process, which involved variations in the quantity of adhesive filled in tubes. The authority noted that the adhesive's viscous and sticky nature led to wastage and spillage during filling, and the estimated quantity in bulk tanks was not always accurate. The adjudicating authority concluded that these factors justified the difference in records.

3. Clandestine Removal of Goods:

The adjudicating authority concluded that there was no evidence of clandestine removal of goods. The demand notices were based solely on the discrepancy in records, without any corroborative evidence of excess raw material consumption or electricity usage to support the allegation of clandestine production and removal. The adjudicating authority cited several Tribunal decisions supporting the view that discrepancies within permissible limits under Standard Weights and Measures Act do not justify demands for duty.

4. Refund Claims Related to Duty Paid on the Differential Quantity of Goods:

Three appeals were related to the refund of duty paid on the differential quantity of goods. Since the main issue of demand was decided in favor of the appellants, the refund claims were remanded to the adjudicating authority for reprocessing. The issue of unjust enrichment was also to be reconsidered.

Judgment:

The Tribunal set aside the impugned orders of the Commissioner (Appeals) and allowed the appeals related to the demand (Appeal No. E/201/08 and E/167/09). The Tribunal remanded the appeals related to refund claims (Appeal No. E/202/08, E/203/08, and E/762/08) to the adjudicating authority for reprocessing, with instructions to reconsider the issue of unjust enrichment.

Conclusion:

The Tribunal found that the discrepancy in production records was due to the nature of the manufacturing process and not due to clandestine removal. The demands based on these discrepancies were not sustainable without corroborative evidence. Consequently, the appeals related to the demand were allowed, and the refund claims were remanded for reprocessing.

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