2017 (12) TMI 832 - AT - Central Excise

Non-accountal of scrap - non-payment of duty - demand of duty under proviso to Section 11A of the CEA, 1944, along with interest under proviso to Section 11AB and proposal to impose penalty u/s 11AC of the Act - Held that - the appellant has shown the said scrap in the register in Form Annexure-IV and it is also a fact that when the said scrap is sold by issuing invoice, the same invoice is reflected in the RG-1 register - It is not the case of the Revenue that the appellant have removed the scrap clandestinely and therefore, simply on the allegation of non-accountal of record properly, the demand cannot be confirmed against the assessee - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of appeal by Commissioner (A)
- Non-accounting of scrap generated at job workers' end
- Allegations of improper record maintenance and non-payment of duty

Analysis:
1. Appeal against rejection of appeal by Commissioner (A): The appellant challenged the impugned order passed by the Commissioner (A) rejecting their appeal. The case involved the manufacture of power transformers and the sending of partially processed items to job workers without duty payment. The appellant contended that the impugned order was passed without proper appreciation of facts and evidence. They argued that scrap generated during job work was returned and duly recorded in the register, contrary to the allegations made. The appellant also highlighted discrepancies in the show-cause notice, claiming it was issued hastily and lacked a coherent basis. The learned counsel cited relevant case laws to support their arguments.

2. Non-accounting of scrap generated at job workers' end: The central issue revolved around the non-accounting of scrap generated at the job workers' end in the RG-1 register. The appellant maintained that the scrap was properly recorded in Form Annexure-IV and cleared on payment of applicable duty. They presented challans, registers, and invoices to substantiate their claim, which they argued were disregarded by both authorities. The Tribunal noted that the only allegation in the show-cause notice was related to the non-accounting of scrap, which the appellant had refuted with documentary evidence. The Tribunal found that there was no evidence of clandestine removal of scrap, leading to the conclusion that the demand could not be upheld solely based on improper record maintenance.

3. Allegations of improper record maintenance and non-payment of duty: The appellant was accused of improper record maintenance, leading to the confirmation of the duty demand. However, the Tribunal observed that the appellant had appropriately recorded the scrap in the register and reflected it in invoices when sold. The Tribunal emphasized that the allegations in the show-cause notice were contradictory and lacked a coherent connection between non-accounting of scrap and suppression of facts. Relying on precedent cases, the Tribunal held that the impugned order was unsustainable in law and set it aside, allowing the appeal of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, overturning the impugned order due to insufficient evidence supporting the allegations of non-accounting of scrap and improper record maintenance. The judgment highlighted the importance of proper appreciation of facts and adherence to legal procedures in such cases.