2000 (5) TMI 106 - AT - Central Excise

Summary

Issues Involved:
1. Allegations of clandestine removal of final products.
2. Confirmation of duty demand based on inflated scrap generation.
3. Imposition of penalty and interest.
4. Confirmation of duty on account of shortages in physical stock.

Summary:

1. Allegations of Clandestine Removal:
The appellants were accused of clandestine removal of Aluminium billets and extruded products during the period April 1988 to November 1992. The charges were based on the suppression of actual production by showing inflated production of generated scrap, supported by statements from the appellants' representatives indicating a scrap generation of about 23%. The Commissioner concluded that the appellants were not maintaining proper records and confirmed the demand of duty by recalculating the emergence of final product based on the 23% scrap generation ratio.

2. Confirmation of Duty Demand:
The Commissioner confirmed a duty demand of Rs. 97,72,057.14 based on the alleged inflated scrap generation ratio. The appellants contended that the charges were based on hypothetical calculations and not on concrete evidence. They argued that scrap generation varies due to several factors and provided evidence, including a letter from M/s. SALCO Extrusion Pvt. Ltd. and a proforma invoice from M/s. Cheng-Hua Machinery Co. Ltd., Taiwan, indicating variable scrap generation ratios. The Tribunal found that the reliance on the statements of non-technical persons over the production manager's statement was not justified and that the calculations based on hypothetical scrap generation ratios could not support the allegations of clandestine removal.

3. Imposition of Penalty and Interest:
A penalty of Rs. 10 lakhs was imposed u/r 173 and Rule 9(2) of Central Excise Rules, 1944, along with interest u/s 11AB of Central Excise Act, 1944. The appellants argued that the provisions of Section 11AB could not be applied retrospectively. The Tribunal agreed, citing the decision in Marcandy Prasad Radhakrishna Prasad Pvt. Ltd. v. C.C.Ex., Calcutta-II, and held that the imposition of penalty and interest was unjustified as the demand itself was unsustainable.

4. Confirmation of Duty on Account of Shortages:
The Commissioner confirmed a duty of Rs. 7,667.60 on account of shortages of 300 kgs of Aluminium shapes and sections found during physical verification. The Tribunal found that the shortages were a small percentage of the total production over more than four years and could be attributed to accounting differences and other factors. In the absence of evidence of removal without payment of duty, the confirmation of this demand was also held to be unsustainable.

Conclusion:
The Tribunal set aside the impugned order, holding that the charges of clandestine removal were not supported by positive and tangible evidence. The appeal was allowed with consequential relief to the appellants.