1985 (1) TMI 70 - AT - Central Excise

Summary

Issues Involved:
1. Shortage of Cold Rolled Strips
2. Unaccounted Production
3. Unaccounted Stocks of Hot Rolled Strips
4. Confiscation under Rule 173Q and Rule 56A(4)
5. Duty Demand under Rule 9(2)
6. Set-off and Proforma Credit under Rule 56A(5) and Rule 10
7. Penal Action under Central Excise Rules

Issue-wise Detailed Analysis:

1. Shortage of Cold Rolled Strips:
The Central Preventive Officers found a shortage of 45.978 Metric Tonnes of Cold Rolled Strips against the recorded book balance of 60.981 Metric Tonnes, with only 15.003 Metric Tonnes physically present. The appellants argued that the shortage was due to estimation errors in production entries. However, the Collector concluded that the shortage indicated clandestine removal without duty payment. The Tribunal found that the shortage was negligible and attributed to eye estimation errors, thus setting aside the demand for duty on these goods.

2. Unaccounted Production:
The appellants admitted that 11.333 Metric Tonnes of Cold Rolled Strips produced on 19th and 20th January 1981 were not recorded in statutory records until 21st January 1981. The Collector held these goods liable for confiscation under Rule 173Q. The Tribunal, however, determined that these goods were not intended for clandestine removal and thus not liable for confiscation.

3. Unaccounted Stocks of Hot Rolled Strips:
The appellants had 84.089 Metric Tonnes of unaccounted Hot Rolled Strips, which were mis-described as Cold Rolled Strips. The Collector allowed the release of 8.695 Metric Tonnes but held the remaining 75.394 Metric Tonnes liable for confiscation due to fraudulent proforma credit claims. The Tribunal found that the appellants had indeed received Hot Rolled Strips from their Ghaziabad unit and set aside the confiscation and penalties.

4. Confiscation under Rule 173Q and Rule 56A(4):
The seized 11.333 Metric Tonnes of Cold Rolled Strips and 75.394 Metric Tonnes of Hot Rolled Strips were ordered for confiscation by the Collector. The Tribunal set aside this order, finding no evidence of fraudulent intent or wrongful availment of credit.

5. Duty Demand under Rule 9(2):
The Collector demanded duty amounting to Rs. 32,874.27 for the shortage of 45.978 Metric Tonnes of Cold Rolled Strips. The Tribunal found that the shortage was due to estimation errors and not clandestine removal, thus setting aside the duty demand.

6. Set-off and Proforma Credit under Rule 56A(5) and Rule 10:
The Collector demanded Rs. 19,75,310.60 availed as set-off and Rs. 3,32,678.75 availed as proforma credit, alleging fraudulent claims. The Tribunal determined that the appellants had correctly availed of the credits based on duty-paid goods and set aside the demands.

7. Penal Action under Central Excise Rules:
The Collector imposed a personal penalty of Rs. 20 lakhs for various rule violations and additional penalties for misleading information and procedural violations. The Tribunal acknowledged procedural irregularities but reduced the penalty to Rs. 1,00,000, finding the original penalties excessive.

Conclusion:
The appeal was partly allowed. The Tribunal modified the impugned order, providing consequential relief to the appellants by setting aside the demands for duty, fines, and most penalties while acknowledging procedural irregularities and imposing a reduced penalty.