2023 (7) TMI 820 - AT - Central Excise

Clandestine removal - excess production as against the annual capacity of production - clearance of excess production without payment of duty - demand of interest and penalty - HELD THAT - The ld. Commissioner (Appeals) in his impugned order has observed that Since the said assesse were operating under Section 3A, actual quantity of production and removal is immaterial, and the assessee has to discharge duty liability fixed by the competent authority on the basis to the ACP determined as peer ACP rules, 1997. In the instant case, monthly duty liability fixed by the competent authority has not been set aside by the higher authority or y the higher forum, and such fixation of ACP, as well as duty liability, cannot be put into question, and I cannot sit on judgment over such issue settled by the then jurisdictional Commissioner, statutorily competent authority in this regard. It is further noted that nowhere the revenue has come forward with an evidence that how the alleged excess production took place and the show-cause notice has been issued without cogent evidence to bring on record the annual capacity of production was not fixed properly. The allegations in the show-cause notice are not sustainable - there are no merit in the appeal filed by the Revenue and the same is dismissed.

Summary

Issues involved:
The issues involved in the judgment are allegations of excess production against the annual capacity of production, duty liability under Section 3A of the Central Excise Act, 1944, show-cause notice for demanding Central Excise duty, interest, and penalty.

Allegations of Excess Production:
The respondents were engaged in the manufacture of excisable goods under the compound levy scheme. The Revenue alleged that the respondents made excess production during a specific period against the fixed annual capacity of production, resulting in clearance of goods without payment of duty. However, the respondents contended that they discharged duty based on the actual capacity determined by the authorities and paid duty accordingly.

Determination of Annual Capacity of Production:
The adjudicating authority initially fixed the annual capacity of production on a provisional basis and later determined it finally. The jurisdictional Commissioner, after due verification of the declaration filed by the respondents, concluded that the respondents did not clear goods without payment of duty. Subsequently, proceedings were dropped based on this observation.

Impugned Order and Observations:
The Commissioner (Appeals) noted that the show-cause notice lacked evidence to sustain the allegation of excess production. It was highlighted that the determination of annual capacity of production and duty liability was done by the competent authority based on rules and verification reports. The charges of availment of deemed credit by downstream manufacturers were deemed baseless as they were not supported by concrete evidence.

Decision and Dismissal of Appeal:
The Tribunal found that the Revenue failed to provide evidence of alleged excess production and issued the show-cause notice without proper substantiation. Consequently, the allegations in the notice were deemed unsustainable, leading to the dismissal of the Revenue's appeal. The Tribunal concluded that since the demand of duty was not sustainable, the question of interest and penalty did not arise.

This judgment highlights the importance of proper evidence and substantiation in allegations of excess production and duty liability under the Central Excise Act, ultimately resulting in the dismissal of the Revenue's appeal due to lack of merit.