2004 (1) TMI 110 - AT - Central Excise

Summary

Issues Involved:
1. Allegation of suppressed production and clandestine removal of excisable goods.
2. Discrepancies in wastage norms for raw materials.
3. Legitimacy of buyers for copper and plastic waste.
4. Reliance on statements from competitors without cross-examination.
5. Limitation period for duty demand.
6. Previous proceedings against the assessee's sister concern.
7. Evidence of past malpractices.

Issue-wise Detailed Analysis:

1. Allegation of Suppressed Production and Clandestine Removal of Excisable Goods:
The Commissioner confirmed a duty demand of Rs. 4,78,37,028 against the assessee for the period 1-1-93 to 31-3-97, alleging suppressed production and clandestine removal of excisable goods. The show cause notice claimed that the assessee manipulated statutory records and showed inflated wastage norms, leading to evasion of Central Excise duty. However, the Tribunal found that the Revenue failed to provide legal evidence to substantiate these allegations. The Tribunal emphasized that the burden of proof lies with the Revenue, which was not adequately discharged.

2. Discrepancies in Wastage Norms for Raw Materials:
The Commissioner relied on data from competitors SSIL and CPWPL to conclude that the assessee's wastage percentages were abnormally high. The assessee argued that wastage depends on several factors, including machinery, labor skill, and raw material quality. The Tribunal noted that the assessee's wastage claims were plausible, given the nature of the raw materials and the manufacturing process. The Tribunal also highlighted that the Revenue did not correlate the raw materials' consumption with the finished goods' production, which was crucial for a fair assessment.

3. Legitimacy of Buyers for Copper and Plastic Waste:
The Commissioner found that most buyers of the copper and plastic waste were fictitious, based on postal authorities' remarks. However, the Tribunal found that a significant portion of the waste was sold to M/s. Manu Plastic, whose representative provided detailed statements and paid by cheque. The Tribunal concluded that the Revenue's claim of fictitious buyers was misleading and not supported by substantial evidence.

4. Reliance on Statements from Competitors Without Cross-Examination:
The Tribunal criticized the Revenue's reliance on statements from SSIL and CPWPL without offering them for cross-examination by the assessee. The Tribunal emphasized that such statements could not be treated as legal evidence and highlighted the need for a fair opportunity for the assessee to challenge these statements.

5. Limitation Period for Duty Demand:
The assessee argued that the entire duty demand was barred by limitation, as the search and seizure took place on 11-1-95, and the show cause notice was issued on 4-2-98. The Tribunal found merit in this contention, noting that the classification and returns were approved by the department without objection, and there was no allegation of suppression of material facts.

6. Previous Proceedings Against the Assessee's Sister Concern:
The assessee pointed out that a similar show cause notice issued to its sister concern, M/s. Prestige Poly Plast, was subsequently dropped. The Tribunal found that the allegations in that case, which involved excess claims of plastic wastage, were not proved. This precedent further weakened the Revenue's case against the assessee.

7. Evidence of Past Malpractices:
The Commissioner referred to an incident on 13-1-94 involving the seizure of watch movements and copper wire from a Maruti car. However, the Tribunal found that this incident alone did not prove regular malpractice by the assessee, given the large quantities of watch movements produced and the explanation provided by the assessee.

Conclusion:
The Tribunal found no reason to agree with the Commissioner's findings of manipulated wastage percentages and clandestine clearance of goods. The order was set aside, and the appeals filed by the assessee were allowed. Consequently, the appeals filed by the Revenue were dismissed, and the assessee was entitled to a refund of the pre-deposit amount of Rs. 50 lakhs.