1990 (4) TMI 149 - AT - Central Excise

Summary

Issues:
Calculation of duty on shortage of Calcined Petroleum Coke, Plea of limitation, Merits of the case regarding the ratio of 100:75, Interpretation of Rule 223A, Discrepancy between RG-I Register and balance sheet figures.

Analysis:

1. Calculation of duty on shortage of Calcined Petroleum Coke: The case involved the appellants manufacturing Calcined Petroleum Coke based on a fixed ratio of 100:75 from indigenous Raw Petroleum Coke. Shortages were detected during stock-taking, leading to show cause notices for levying duty and imposing penalties. The appellants argued that the shortage was due to natural causes and variations in raw material composition.

2. Plea of limitation: The appellants contended that the claim for duty was time-barred as the show cause notices were issued beyond the 6-month limitation period prescribed in Section 11-A of the Central Excise Act, 1944. The Tribunal agreed that the claim was indeed barred by limitation, as the notices were issued for the years 1979 and 1980 in 1982.

3. Merits of the case regarding the ratio of 100:75: The appellants argued that the fixed ratio of 100:75 for manufacturing Calcined Petroleum Coke allowed for variations due to the nature of the process. They provided detailed analysis of the raw material composition over the years to support their claim that the shortage was within acceptable limits. The Tribunal accepted this argument, noting that the ratio could not be rigid and that variations were inherent in the production process.

4. Interpretation of Rule 223A: The appellants contested the application of Rule 223A, arguing that the conditions for its application were not met. They highlighted that no enquiry was conducted by the proper officer, and allowances for waste due to natural causes were not considered. The Tribunal agreed with the appellants, finding that Rule 223A was not violated in this case.

5. Discrepancy between RG-I Register and balance sheet figures: The Collector of Central Excise had drawn adverse inferences from the differences between the RG-I Register and the balance sheet figures. However, subsequent proceedings had favored the appellants, indicating that the discrepancies were not substantial. The Tribunal concluded that the reasoning based on these discrepancies was not sustainable.

6. Judgment: The Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal. The decision was based on both the plea of limitation and the merits of the case, where the appellants successfully demonstrated that the shortage was reasonable given the inherent variations in the production process.