2008 (3) TMI 55 - AT - Central Excise

Duplication of demand on the same figures once as shortage on the basis of EB-4 register & other on the basis of shortage as compared to RG-1 Register so demand set aside - except the statements of 2 officers there is no other evidence to show that grey return fabric wasn t actually grey fabric returned but these entries were made only to adjust the processed fabrics cleared without payment of duty demand not justified part of demand, interest & penalty for clandestine removal is upheld

Issues Involved:
1. Difference between stock in EB-4 (Amended) and physical stock within and outside the BSR.
2. Difference between closing balance as per RG-1 register and physical stock as on 26-2-98.
3. Non-payment of Central Excise duty on fabrics shown as grey return in RG-1 register during the period 1-4-93 to 26-2-98.
4. Non-payment of Central Excise duty on fabrics seized outside the mills on 26-2-98.

Issue-wise Detailed Analysis:

(i) Difference between stock in EB-4 (Amended) and physical stock within and outside BSR:
3.1 The revenue pointed out discrepancies in the EB-4 (Amended) register, showing a shortage of 2096 bales. The respondents argued that the figures in the show cause notice were inaccurate, and the correct figures showed no shortage. The revenue's method of determining shortages based on uncircled bales was found to be incorrect.

3.2 There was also a duplication of demand as the same figures were used for shortages in both the EB-4 register and the RG-1 register.

3.3 The Tribunal upheld the Commissioner's order dropping the demand due to inaccurate figures and duplication of demand.

(ii) Non-payment of Central Excise duty on fabrics shown as grey return in RG-1 register during the period 1-4-93 to 26-2-98:
4.1 The revenue contended that pencil entries in the RG-1 register were made to adjust processed fabrics cleared without payment of duty. However, apart from the statements of two officers, there was no other evidence to support this claim. The respondents provided RT 12 returns and grey return delivery challans as evidence.

4.2 The Tribunal found that the retracted statements of the officers could not be relied upon without corroborative evidence. The documentary evidence provided by the respondents was accepted as genuine, and the demand was correctly dropped by the Commissioner.

(iii) Demand of Rs. 83,96,713.79 due to difference between closing balance of stock as per RG-1 register and physical stock as on 26-2-98:
5.1 The demand was divided into two parts: Rs. 51,63,832.35 for cotton fabrics and Rs. 32,32,881.44 for man-made fabrics.

5.2 For cotton fabrics, the alleged shortage was 7,37,611.83 L. Mts. However, the respondents provided grey return challans for a higher quantity than considered by the revenue. After accounting for fabrics destroyed in a fire, the shortage was reduced to 826.48 L. Mts., and the Tribunal sustained the demand for this quantity.

5.3 For man-made fabrics, the alleged shortage was 5,38,939.31 L. Mts. The respondents provided evidence for a higher quantity of grey return and fabrics destroyed in a fire. The Commissioner attributed the remaining shortage to shrinkages, but the Tribunal found no evidence to support this claim. The matter was remanded to the Commissioner to quantify the duty on the shortage.

(iv) Demand of duty amounting to Rs. 3,08,736/- for 144 bales seized from the godown:
6.1 The respondents claimed these were returned processed goods initially cleared on payment of duty. They provided evidence for 40 bales but not for the remaining 104 bales. The Tribunal held that duty was payable on the 104 bales, and the matter was remanded to the original adjudicating authority to determine the duty liability and redemption fine.

6.2 The Tribunal rejected the respondents' plea on limitation, holding that the extended period for demand was applicable due to clandestine removal of goods. The liability to interest was also upheld, and the Commissioner was directed to quantify the interest.

7.0 The Tribunal upheld penalties under Sec. 11AC and various rules of the Central Excise Rules, 1944, due to part of the demands being sustained. The matter was remanded to the Commissioner for determining the duty on shortages, imposing penalties, and releasing confiscated goods on payment of redemption fine. The appeals were disposed of accordingly.

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