2018 (1) TMI 1204 - AT - Central Excise

Clandestine removal - It was alleged that the quantity manufactured were not fully declared in ER-1 returns and the balance quantity was allegedly cleared clandestinely without payment of duty - closure of units - Held that - it has been claimed that shut down of the production capacity for several days has been duly intimated to the department under acknowledgment. However, if this was true, then the appellant will be entitled to abatement in the Annual Production Capacity for the period for which the factory was closed under due intimation to the department. Since the details of such intimation of closers are not before us, the matter needs to go back to the Adjudicating Authority by way of remand proceedings - appeal allowed by way of remand.

Summary

Issues:
- Duty demand on alleged clandestine clearance
- Capacity declaration in annual returns
- Time bar for duty demand

Analysis:
1. Duty demand on alleged clandestine clearance:
The appellant, engaged in sponge iron manufacturing, faced duty demand for allegedly clearing goods clandestinely without duty payment. The Revenue compared quantities declared in ER-7 annual returns with ER-I monthly returns, alleging undeclared finished goods. The appellant argued no investigation was conducted, citing raw material shortages due to the coal scam, factory closures, and duty payable on actual production quantity under Section 3 of the Central Excise Act. The appellant also claimed duty demand was time-barred.

2. Capacity declaration in annual returns:
The dispute focused on the capacity declared in ER-7 returns, with the appellant declaring 60,000 MT against a potential 72,000 MT production capacity. The Adjudicating Authority interpreted the reduced capacity as accounting for production constraints. The appellant cited various constraints affecting production, such as raw material shortages, kiln shutdowns, high costs, and market conditions. The Tribunal noted that the capacity declaration in ER-7 was for the succeeding year, implying the declared capacity was utilized in the relevant financial year. However, the Tribunal recommended remand proceedings for considering factory closures and granting abatement if intimated to the department.

3. Time bar for duty demand:
The appellant argued the duty demand was time-barred, emphasizing constraints faced during the disputed period and lack of investigation into alleged clandestine clearances. The Tribunal did not conclusively address the time bar issue but focused on the capacity declaration discrepancy and the need for further proceedings to consider factory closures and abatement in production capacity.

In conclusion, the Tribunal set aside the impugned order and remanded the matter for denovo proceedings to address factory closures' impact on production capacity, emphasizing the need for effective hearing and consideration of intimated closures.