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2008 (8) TMI 471 - AT - Central ExciseSuppression of production and clandestine removal demand of near about Rs. 7 crore based on theoretical calculation of ratio of raw materials to pulp and from pulp to paper demand arrived at on theoretical basis on basis of weigh bridge register, RT5 Formula of pulp quantity multiplied by 100.88 to arrive at quantity of paper basis of adoption of ratio 100.88 not clear Held that figures of another unit having modern machinery is not correct basis for arriving at clandestine manufacture and removal Revenue should have conducted experiment to arrive at ratio of raw materials to pulp and also to paper - Unless those figures arrived at by theoretical calculations are backed by concrete evidence, no demand can be made. As regards exemption for waste paper under Notification No. 47/83, no detailed finding regarding percentage of waste paper consumed in 1984-85 and1985-86 Collector referring to import of old newspaper and its diversion to various dealers Commissioner has not given any reason for rejecting calculations submitted by assessee - Held that merely on account of diversion of imported old newspaper, conclusion of less consumption of waste paper cannot be arrived held that exemption is available demand is not sustainable Paper submitted as cleared under Notification No. 163/67 dated 21-6-1967 for text books to Director of Public Instructions Investigations revealing that submitted amount not received by such Director allegation that certain clearances with fictitious gate passes and certain clearances for which exact detailed not given SCN not giving details of either fictitious gate passes/invoices further, there was no detail as to customers to whom paper cleared hence demand of nearly 18 lakh, is set aside Though majority of demand is set aside, wrong availment of exemption for part of the period was upheld penalty on director (who is involved actively in function of factory), is upheld - (a) We set aside the demand of Rs. 4,58,71,914/- on the alleged clandestine clearance. (b) We set aside the demand of Rs. 18,37,879/- on account of the alleged wrong availment of the Notification No. 163/67-C.E., dated 21-6-1967 for supply of paper for printing of news paper, text books, etc. (c) We remand the matter in respect of the demand of duty for the year 1983-84 for consumption of waste paper less than 50%. (d) We hold that the appellants are entitled for the benefit of Notification No. 47/83-C.E., dated 1-3-1983 therefore. (e) We set aside the demand of differential duty for the years 1984-85 and 1985-86 in respect of the consumption of waste paper less than 50%. (f) We set aside the confiscation of 891.16 MTs of paper. We also set aside the confiscation of land, building, plant and machinery used for the manufacture of paper. As a result, the redemption fines imposed are set aside.
Issues Involved:
1. Suppression of production and clandestine removal of paper. 2. Wrong availment of exemption notification for supply of paper for text book printing. 3. Wrongful availment of exemption under Notification 47/83-C.E. regarding consumption of waste paper. 4. Seizure and confiscation of paper and factory assets. 5. Penalty imposed on individuals. Detailed Analysis: 1. Suppression of Production and Clandestine Removal of Paper (Demand of Rs. 4.84 crores): The Show Cause Notice (SCN) alleged suppression of production and clandestine removal of 70,641.002 MT of paper from May 1981 to November 1985, involving a duty of Rs. 4,84,46,601/-. The SCN relied on various records, including raw material accounts, weighbridge accounts, and RT-5 returns, to estimate the production of paper. The SCN proposed certain percentages for pulp yield from different raw materials and assumed that every 88 units of pulp would produce 100 units of paper. The Tribunal found that the SCN and the Order-in-Original were based on arbitrary assumptions and theoretical calculations without concrete evidence. The Tribunal noted that the percentage yield of pulp and the conversion ratio of pulp to paper were not substantiated with credible evidence. The Tribunal emphasized that the charge of clandestine removal requires tangible and positive evidence, which was lacking in this case. Consequently, the demand of Rs. 4,58,71,914/- was set aside. 2. Wrong Availment of Exemption Notification 163/67-C.E. for Supply of Paper for Text Book Printing (Period 1985, Amount Rs. 18,37,879/-): The SCN alleged that the appellants wrongfully availed exemption under Notification 163/67-C.E. for 725.379 MT of paper claimed to be supplied for text book printing but actually diverted. The SCN and the Commissioner's findings were based on discrepancies between the quantities shown as issued to the Director of Public Instructions (DPI) and the quantities actually received by DPI. The Tribunal found that the SCN did not provide sufficient details or evidence to support the allegation. The Tribunal noted that the Commissioner's findings included details not mentioned in the SCN, making the order beyond the scope of the SCN. Consequently, the demand of Rs. 18,37,879/- was set aside. 3. Wrongful Availment of Exemption under Notification 47/83-C.E. Regarding Consumption of Waste Paper (Period 1983-84 to 1985-86): The SCN alleged that the appellants wrongfully availed exemption under Notification 47/83-C.E. by manipulating records to show higher consumption of waste paper than actually used. The SCN detailed the modus operandi and provided calculations of the actual percentage of waste paper used. For 1983-84: The appellants conceded using less than 50% waste paper but pointed out arithmetical errors in the SCN's calculations. The Tribunal remanded the matter to the Commissioner for re-computation of the differential duty after correcting the arithmetical errors. For 1984-85: The Tribunal found that the SCN and the Commissioner's findings contained errors in calculating the percentage of waste paper used. The Tribunal noted that the correct percentage, as per the appellants' records, was more than 50%. Consequently, the demand for 1984-85 was set aside. For 1985-86: The Tribunal found that the SCN and the Commissioner's findings did not provide a clear basis for denying the exemption. The appellants had shown a waste paper consumption percentage of 76.24%, which was not refuted with evidence. Consequently, the demand for 1985-86 was set aside. 4. Seizure and Confiscation of Paper and Factory Assets: The SCN mentioned the seizure of 891.166 MT of paper, which was in excess of the RG1 quantity. The appellants contended that the seized paper had not reached the RG1 stage and provided a detailed explanation of the stock. The Tribunal found that the Commissioner did not adequately address the appellants' submissions and that there was no evidence of an attempt for illicit clearance. Consequently, the confiscation of the seized paper and the factory assets, including land, building, plant, and machinery, was set aside. The associated redemption fines were also set aside. 5. Penalty Imposed on Individuals: The Commissioner imposed a penalty of Rs. 3000/- on Mr. Kunal Dalmia under Rule 52A(5), 210, and 226 of the Central Excise Rules. The Tribunal upheld the penalty, noting that Mr. Kunal Dalmia was actively involved in the functioning of the factory and aware of the irregularities. Summing Up: (a) The demand of Rs. 4,58,71,914/- on alleged clandestine clearance was set aside. (b) The demand of Rs. 18,37,879/- for wrong availment of Notification 163/67-C.E. was set aside. (c) The matter for 1983-84 regarding consumption of waste paper less than 50% was remanded for re-computation. (d) The demand for 1984-85 and 1985-86 regarding consumption of waste paper less than 50% was set aside. (e) The confiscation of 891.16 MT of paper and factory assets was set aside. (f) The penalty on Mr. Kunal Dalmia was upheld.
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