2022 (7) TMI 1178 - HC - Central Excise

Condonation of losses for pig iron - What was the stock notionally determined and actually determined by the respondent assessee and how it was adjusted in their accounts without being reflected in the Central Excise records? - accepting a reconciliation statement as submitted by the respondent assessee without explaining the same that what was the stock notionaly determined and actually determined by the respondent assessee and how it was adjusted in their accounts without being reflected in the Central Excise records? - applicability of Circular of CBEC being CBEC circular No.52/79-CX-6 dated 26th October, 1979 - HELD THAT - In terms of Circular issued by the CBEC dated 26th October, 1979, the condonation of losses for pig iron have been fixed at 2% and for the iron in any crude form at 25% and with regard to tariff item 26AA and 26, it was fixed at 1%. The assessee had filed a reconciliation statement before the Tribunal which shows that the percentage of loss was well within the parameters fixed by the CBEC in the Circular stated above. That apart, the Tribunal has also taken note of the earlier decisions of the Tribunal and in particular, the decision in the case of RASHTRIYA ISPAT NIGAM LTD. VERSUS COMMR. OF CUS. C. EX., VISAKHAPATNAM 2008 (9) TMI 663 - CESTAT, BANGALORE . The facts of the said case are identical to that of the case on hand - it was held in the case that As far as clearance of these products is concerned, it is based on weighment. But when the products are used for capital consumption, the accounting of clearance for the capital consumption is done on the basis of standard grab weight. During the stock verification, the method followed is volumetric calculation method. Based on the volume and density the weight is calculated. Thus, we find that different criteria are adopted for estimating the pig iron for different purposes. Therefore, in the very nature of the accounting, there is bound to be difference. Unless it is shown that the appellants had cleared the goods without payment of duty in a clandestine manner, or in other words, unless there is evidence to show that there is clandestine clearance, this type of demand of duty is not sustainable. The period covered by the show-cause notices was as on 31st March, 1989, 31st March, 1990 and 31 st March, 1991. Two show-cause notices were issued on January 30, 1991 and March 31, 1992 for which the assessee had submitted replies on August 2, 1991 and January 25, 1993, after a gap of nearly 17 years from the relevant period where a notice of personal hearing was issued on 19 th August, 2006 and the respondent assessee co-operated with the adjudication and also filed the written submission and the adjudication order was passed on 21st November, 2006. It is not clear as to why there was so much of delay in taking up the show-cause notice for adjudication and more particularly, when 17 years have elapsed after the relevant period the adjudication itself should be termed to be a stale adjudication. The Learned Tribunal rightly allowed the appeal filed by the respondent assessee and the revenue has not made out any grounds to interfere with the said order - Appeal dismissed.

Summary

Issues involved:
1. Interpretation of directions from the Hon'ble High Court regarding stock adjustment in Central Excise records.
2. Acceptance of reconciliation statement by the Tribunal without detailed explanation of stock adjustments.
3. Applicability of CBEC Circular No.52/79-CX-6 in the case.

Detailed Analysis:
1. The appeal by the revenue under 235C of the Central Excise Act, 1944 challenged the order passed by the Tribunal. The High Court considered whether the Tribunal followed the High Court's direction regarding the stock notionally determined and actually determined by the respondent-assessee and its adjustment in Central Excise records. The Tribunal, in the de novo proceedings, conducted a detailed comparison of facts and found the stock shortage within permissible limits set by CBEC Circular No.52/79-CX-6. The absence of allegations of clandestine removal raised a time bar issue for the show-cause notice.

2. The Tribunal's acceptance of the reconciliation statement without a detailed explanation of stock adjustments was challenged. The High Court noted that the Tribunal's elaborate exercise in comparing facts with previous decisions, like Rashtriya Ispat Nigam Ltd., supported the acceptance of the reconciliation statement. The Tribunal's reliance on earlier decisions and the absence of appeals against its findings from other High Courts led the High Court to uphold the Tribunal's decision.

3. The High Court analyzed the applicability of CBEC Circular No.52/79-CX-6, which set condonable loss percentages for different iron and steel items. The reconciliation statement filed by the assessee showed compliance with the Circular's parameters. The High Court cited various decisions, including Steel Authority of India Ltd. and Rourkela Steel Plant cases, to emphasize the need for a consistent approach by the Department. The High Court dismissed the appeal, upholding the Tribunal's decision and answering the substantial questions of law against the revenue. The stay application was also dismissed with the appeal.