1987 (8) TMI 226 - AT - Central Excise

Summary

Issues:
1. Seizure and confiscation of wrist watches from factory and bank's godown.
2. Allegation of clandestine removal of watches by the appellant.
3. Demand of duty and penalty imposed on the appellant.
4. Onus of proving non-duty paid character of goods.
5. Wastage of watch parts during assembly process.
6. Comparison of wastage with other similar units.
7. Validity of penalty imposed on the appellant.

Analysis:

1. The case involved the seizure and confiscation of wrist watches from the factory and the bank's godown by the Preventive Staff of Central Excise Collectorate based on discrepancies in physical stock and book balance. The adjudicating authority released 100 watches from the factory but confiscated 100 watches from the bank's godown for lack of evidence of duty payment.

2. The appellant contested the allegation of clandestine removal of watches, arguing that the watches were part of a duty-paid consignment cleared earlier. The appellant emphasized that the onus of proving non-duty payment lies with the department and challenged the basis for considering the watches non-duty paid.

3. The adjudicating authority demanded duty on watches allegedly manufactured and cleared clandestinely by the appellant, along with imposing a penalty for contravention of Central Excise Rules. The appellant disputed these claims, citing the importation of watch movements and explaining the discrepancy as wastage inherent in the assembly process.

4. The tribunal agreed with the appellant's argument regarding the onus of proving non-duty payment, emphasizing the lack of adequate evidence presented by the department to support the confiscation of the watches from the bank's godown. The tribunal ordered the release of the confiscated watches.

5. The issue of wastage of watch parts during the assembly process was raised, with the appellant explaining the nature of small watch parts and the practical challenges in retrieving and producing waste material. The tribunal acknowledged the occurrence of wastage and criticized the adjudicating authority for not considering comparable wastage in similar units.

6. The tribunal agreed with the appellant's position on wastage, highlighting the failure of the adjudicating authority to compare wastage levels across similar units. The tribunal emphasized that demands for duty cannot be based on unwarranted assumptions and surmises, citing a Supreme Court ruling to support its decision to set aside the duty demand.

7. Finally, the tribunal set aside the penalty imposed on the appellant, concluding that the appeal should be allowed in full with consequential relief granted to the appellant. The judgment favored the appellant on all counts, emphasizing the importance of evidence and proper assessment in excise duty cases.