2004 (4) TMI 173 - AT - Central Excise

Demand - Clandestine removal - Whether the appellant engaged in manufacturing alloy steel and stainless steel castings removed goods without discharging Central Excise duties under the guise of processing loss - HELD THAT - The appellant has tried to explain that such loss occurs at various stages of slag off pouring grinding cutting heat treatment and gauging as also the main loss occurs on the point of melting. We find that no verification has been conducted by the Central Excise officers so as to adjudge the appellants claim of loss of higher percentage. We also note that the appellants placed before us an order by the Income Tax authorities showing the percentage losses of similarly situated units which is higher than the one claimed by the appellant in the present case. Apart from that there is no other material or evidence on record to show that the appellant have been in fact manufacturing steel castings clandestinely and removing the same without payment of duty. It is well settled law that the onus to prove the clandestine clearance lies heavily upon the Revenue and it is required to be discharged by production of sufficient tangible and affirmative evidence. In the instant case there is nothing on the record. Mere claiming of higher invisible processing loss may lead to some doubt against the appellant but cannot take the place of legal evidence so as to inevitably conclude that the casting have been manufactured under the guise of processing loss. We also observe that case laws relied upon by the DR is not applicable to the facts of this case inasmuch as in that case disputed issue was of waste and scrap originated at the job workers premises and it was specifically observed in the case that the appellants have not given any estimation of invisible loss. Our attention has been drawn to the Tribunal s decision in the case of Premier Packaging v. Collector 1986 (7) TMI 254 - CEGAT NONEW DELHI wherein it was held that shortage of raw material cannot lead to evidence of clandestine manufacture and surreptitious removal of goods. Inasmuch as in the instant case there is no positive evidence reflecting upon clandestine removal by the applicant we are of the view that the impugned orders cannot be sustained. We set aside the same and allow all the appeals with consequential relief if any to the appellants.

Summary

Issues involved:
The issue involved in this case is whether the appellant, engaged in manufacturing alloy steel and stainless steel castings, removed goods without discharging Central Excise duties under the guise of processing loss.

Summary:

1. The appellant, M/s. Western Metal Caps. Ltd., faced allegations of removing steel castings without paying Central Excise duties based on audit objections regarding processing loss percentages in their balance sheets for certain years.

2. The appellant argued that the processing loss percentages were accurate and fell within the normal range for their industry, citing various processes that contribute to such losses. They also presented evidence from an Income Tax assessment supporting their claims of processing losses.

3. The appellant contested the Commissioner's reliance on guidelines for integrated steel plants, stating they were not applicable to their situation.

4. The appellant challenged the demand on the grounds of limitation, arguing that the removal was reflected in their Central Excise records, thus the longer period of limitation was unjustified.

5. The Revenue contended that the high percentage of processing loss indicated possible removal of final products without duty payment, referencing a relevant case law to support their argument.

6. The Tribunal noted the lack of verification by Central Excise officers regarding the appellant's claimed processing losses. They highlighted the absence of tangible evidence proving clandestine manufacturing and removal of goods without duty payment, emphasizing the Revenue's burden to provide such evidence.

7. Referring to a previous Tribunal decision, the Tribunal concluded that without positive evidence of clandestine removal, the impugned orders could not be upheld. Therefore, they set aside the orders and allowed all appeals in favor of the appellants.