1993 (3) TMI 124 - SC - Central Excise

Demand on the basis of normal production - Assessment - Normal production - Fixation of - Appeal - Evidence - Appreciation of

Summary

Issues:
1. Interpretation of exemption notifications under the Central Excises and Salt Act, 1944.
2. Allegations of removal of goods without proper records and fabrication of accounts.
3. Arbitrariness in estimating production figures by the Collector.
4. Basis of estimating production through electricity consumption.
5. Rejection of argument based on factory's installed capacity.
6. Interpretation of Rule 173E of the Central Excise Rules regarding determination of normal production.

Detailed Analysis:
1. The judgment involved an appeal under Section 35B of the Central Excises and Salt Act, 1944 against a decision of the Customs, Excise and Gold (Control) Appellate Tribunal. The appellant, a partnership firm engaged in manufacturing tread-rubber, was subject to duty under a specific tariff item. Exemption notifications were in place based on production value thresholds for different years.

2. A search conducted at the appellant's premises revealed the removal of a substantial quantity of tread-rubber without proper records. The Managing Partner admitted to the removal and falsification of accounts to stay below the exemption limit. A show cause notice was issued, leading to confirmation by the Collector and subsequent dismissal of the appeal by the Tribunal.

3. The appellant challenged the arbitrary estimation of production by the Collector, alleging it was a "wild guess" without relevant evidence. The Supreme Court held that factual findings cannot be disturbed unless there are errors in considering evidence or if the findings are baseless or unreasonable.

4. The estimation of production based on electricity consumption was contested by the appellant, claiming the meter was faulty during the base period. However, the Court rejected this argument, stating that the appellant failed to provide evidence to support the claim of meter malfunction.

5. The appellant's argument regarding production exceeding the factory's installed capacity was also dismissed by the Tribunal, as the production figures disclosed by the appellant contradicted this claim.

6. The appellant invoked Rule 173E of the Central Excise Rules, arguing that power consumption alone cannot be the basis for production estimation. The Court clarified that the Rule does not mandate consideration of all factors simultaneously, especially in cases where accounts are fabricated, and upheld the Tribunal's decision.

In conclusion, the Supreme Court dismissed the appeal, upholding the Collector's estimation of production and rejecting the appellant's arguments regarding faulty meter readings, factory capacity, and interpretation of Rule 173E.