2009 (2) TMI 216 - AT - Central Excise

SSI exemption - Use of brand name of another and shortage of raw material - benefit of exemption under Notification No. 1/93 till 31-3-94 - The explanation of the appellants are that they had stock of printed bags which were used prior to 31-3-94 and some of them have been mistakenly used by the illiterate workers. It is noticed that 370 bags were in the finishing hall of WCPL and the bags which were yet to be stitched and some of them contained the inscription that the same are manufactured by SCM and SII. This evidence, in our opinion, does not support the case of the Department. This supports the claim by the appellants that these goods were manufactured in WCPL only, even though inscription in some bags indicated as if manufactured by SCM and SII. - We find that the explanation by the appellant is acceptable in the absence of any other evidence to show that the goods were manufactured by SCM and SII with the brand name of WCPL for the period 1-4-94 to 31-3-95. Therefore, the demands are not sustainable regarding shortage of raw material, cenvat credit of the amount of raw material found short, is required to be reversed Penalty not sustainable

Summary

Issues:
1. Wrong availment of exemption under Notification No. 1/93 by firms SCM and SII.
2. Alleged clandestine removal of goods and duty evasion due to shortage of soda ash.
3. Alleged evasion of central excise duty by WCPL.
4. Imposition of penalties on WCPL and individuals involved in duty evasion.

Analysis:

Issue 1:
The Commissioner alleged that firms SCM and SII wrongly availed the benefit of Notification No. 1/93 by using the brand name of WCPL. The appellants argued that the goods seized were manufactured only by WCPL and any inscriptions indicating SCM and SII were due to a mistake by illiterate workers. The Tribunal found the evidence insufficient to prove that SCM and SII manufactured goods under WCPL's brand, thus ruling the demands against SCM and SII unsustainable.

Issue 2:
Regarding the shortage of soda ash and alleged clandestine removal of goods, the Commissioner concluded that finished products were clandestinely removed based on the shortage of soda ash. However, the Tribunal disagreed, stating that there was no substantial evidence to support this claim. The Tribunal directed the appellants to reverse/deposit the proportionate Cenvat credit for the shortage of soda ash but set aside the demand for excess production and clandestine removal.

Issue 3:
The Commissioner alleged that WCPL clandestinely cleared a higher quantity of goods than reported, evading central excise duty. The Tribunal found no violation of Notification 1/93 by WCPL and disagreed with the Commissioner's findings of goods being cleared without proper payment of duty. The Tribunal ruled that only the Cenvat credit for the raw materials found short should be paid, and no other demands or penalties were sustainable.

Issue 4:
Regarding penalties, the Commissioner imposed a penalty only on WCPL, which was contested. The Tribunal found no justification for sustaining the penalty, as there was no evidence of unaccounted manufacture or clearance of chemicals. Penalties on individuals involved in duty evasion were not sustained.

In conclusion, the Tribunal disposed of the appeals by directing the payment of Cenvat credit for the shortage of soda ash while ruling out other demands and penalties. The judgment highlighted the importance of substantial evidence in proving allegations of duty evasion and emphasized the need for justifying penalties based on concrete violations.