2006 (5) TMI 6 - AT - Central Excise

Summary

Issues:
1. Shortages in finished products and raw material detected by Central Excise officers.
2. Evidence based on visual examination and partner's statement.
3. Limitation period for issuing show cause notice.

Analysis:
1. The case involved shortages in finished products and raw material detected during a visit by Central Excise officers to the appellant's premises. The shortages were admitted by the appellants, and duty on the same was confirmed with penalties imposed.

2. The appellant argued that the shortages were detected based on visual examination and the partner's statement, without substantial evidence proving that goods were cleared without duty payment. Reference was made to a CEGAT decision stating that demands based on visual examination without actual weighment and tangible evidence are not sustainable. The appellant also contended that the show cause notice issued in 2002 was time-barred, citing precedents where delays in issuing notices rendered them time-barred.

3. The J.D.R. countered by emphasizing the appellant's admission of shortages, which remained unchallenged. The J.D.R. also referred to a Larger Bench decision stating that the limitation period for demanding duty could extend to five years, even if the department had prior knowledge of fraud or suppression.

4. The judgment considered the lack of corroborative evidence for shortages beyond visual examination. It noted that the partner's subsequent statement did not clearly admit to the shortages. Following the precedent set by the Tribunal in a similar case, the demand based solely on visual examination was deemed unsustainable.

5. Regarding limitation, the judgment upheld the decision that mere departmental knowledge does not shorten the period provided under Section 11A. The judgment differentiated between Single Bench or Division Bench decisions and the Larger Bench decision in the Nizam Sugar Factory case, concluding that the demand was not time-barred.

6. Consequently, the appeal was allowed on merits alone, granting consequential relief to the appellant. The judgment was pronounced on 4.5.2006.