1988 (11) TMI 156 - AT - Central Excise

Summary

Issues Involved:
1. Alleged suppression of facts and failure to maintain statutory accounts.
2. Legality and correctness of the Collector's order confirming the demand of duty.
3. Time-bar on the demand of duty for the period exceeding six months.
4. Justification for the imposition of penalty.

Detailed Analysis:

1. Alleged Suppression of Facts and Failure to Maintain Statutory Accounts:
The primary allegation against the appellants was that they had suppressed the facts of production of soda ash with the intent to evade payment of excise duty and failed to maintain statutory accounts. The show cause notice alleged that the appellants deducted the quantity of soda ash light as loss and did not account for it in the production records, thereby contravening various clauses of Rule 173Q and other related rules. The department based its allegations on the daily production reports submitted by the appellants, which showed a notional loss of soda ash light during the manufacturing process. The appellants contended that this loss was a manufacturing loss and not indicative of clandestine production or removal.

2. Legality and Correctness of the Collector's Order Confirming the Demand of Duty:
The Collector's order was challenged on the grounds that it was based on notional losses rather than actual clandestine removal. The appellants argued that the soda ash light could not be quantified or weighed at the specified place of production due to its high temperature (220^0C) and that the loss shown in the reports was a manufacturing loss, calculated based on the ratio of inputs used. The department's contention that the fully manufactured soda ash light was subject to duty as it was deemed removed during the manufacture of soda ash dense was not supported by the facts. The Tribunal found that the loss shown was notional and that there was no physical or deemed removal of soda ash light that would attract duty.

3. Time-Bar on the Demand of Duty for the Period Exceeding Six Months:
The appellants argued that the demand for duty for a period exceeding six months preceding the date of the show cause notice was barred by time. The Tribunal noted that the department had not provided any independent evidence of willful mis-statements or suppression of facts. The show cause notice was issued based on the appellants' own disclosures in their daily production reports. Given the lack of evidence for clandestine removal or suppression of facts, the demand for duty for the period exceeding six months was deemed time-barred.

4. Justification for the Imposition of Penalty:
The Collector had imposed a penalty of Rs. 3,50,000 on the appellants, alleging illicit removal of soda ash. The appellants contended that there was no clandestine removal and that the penalty was unjustified. The Tribunal found that the department had failed to establish any clandestine production or removal and that the appellants had maintained proper records as per the permissions granted by the Assistant Collector. Consequently, the imposition of the penalty was deemed unwarranted and incorrect.

Conclusion:
The Tribunal allowed the appeal, setting aside the Collector's order in its entirety. The demand for duty and the imposition of penalty were found to be illegal, erroneous, and unjustified. The duty and penalty, if paid, were ordered to be refunded to the appellants.