1993 (4) TMI 131 - AT - Central Excise

Issues:
1. Central Excise duty evasion by misdeclaration of cotton yarn counts.
2. Alleged duty evasion due to invisible loss of yarn during winding.
3. Confirmation of demand and imposition of personal penalty.
4. Challenge to the demand based on misdeclaration of yarn counts.
5. Challenge to the demand based on invisible loss of yarn during winding.
6. Applicability of extended period for demand due to suppression.
7. Justification of penalty under Rule 173Q.

Analysis:
1. The appeal was against the Order-in-Original confirming a demand for Central Excise duty evasion by misdeclaring cotton yarn counts. The appellants were alleged to have evaded duty by declaring lower counts than the actual higher counts produced. The surprise visit by Central Excise Officers revealed discrepancies in the statutory and private records, leading to a demand of Rs. 5,73,744.15 for the period of 1-1-1983 to 31-5-1987. The appellants argued that their records were maintained correctly and samples taken by authorities in the past matched the declared counts, challenging the basis of the demand.

2. The adjudicating authority upheld the demand for duty evasion based on misdeclaration of counts and invisible loss during winding. The authority referred to the duty payment stage and previous CEGAT decisions to confirm the demand and impose a personal penalty. The consultant for the appellants reiterated their compliance with duty payment procedures and challenged the allegations, emphasizing the lack of evidence supporting the demand and invoking limitations on the demand.

3. The department argued that separate private records maintained by the appellants indicated discrepancies in declared counts for duty payment purposes. They contended that any loss post-manufacturing should not be exempt from duty payment. The demand for duty evasion due to invisible loss was supported by the department, emphasizing the need to account for all losses post-manufacturing.

4. The Tribunal analyzed the evidence and submissions, noting that the demand for duty evasion was primarily based on private records showing discrepancies in counts. However, the appellants provided evidence of past tests by authorities that aligned with declared counts, raising doubts about the basis of the demand. The Tribunal found that the demand solely relying on private records was not substantiated by other documents and previous tests, leading to the rejection of the demand.

5. Regarding the demand based on invisible loss during winding, the Tribunal found that the demand was beyond the six-month period and relied on the extended period due to alleged suppression. However, the appellants presented a previous order withdrawing a similar demand, indicating that the department was aware of their accounting practices. The Tribunal held that the demand was time-barred and lacked merit, citing previous decisions and trade notices supporting the appellants' accounting procedures.

6. The Tribunal concluded that none of the demands raised were sustainable, setting aside the order confirming the demands. The penalty under Rule 173Q was deemed unjustified due to the lack of proven duty evasion. The appeal was allowed, and consequential relief was ordered to follow, overturning the original order and penalties imposed.

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