1991 (11) TMI 158 - AT - Central Excise

Summary

Issues Involved:
1. Whether the proceedings are barred by the principles of res judicata.
2. Whether the findings of the Collector that the appellants had removed 313.823 M.Ts. of charge chrome without accounting for the same and the demand of duty of Rs. 47,61,761.78 is justified.
3. Whether the imposition of penalty under Section 112 of the Customs Act, 1962 is legal and proper.

Issue-wise Detailed Analysis:

1. Whether the proceedings are barred by the principles of res judicata:

The appellants contended that the show cause notice and subsequent proceedings were barred by res judicata based on orders from the Orissa High Court and the Supreme Court. The High Court had earlier quashed show cause notices, and the Supreme Court allowed the Collector to seek further directions from the High Court if advised. The Tribunal analyzed the sequence of orders and found that the High Court had permitted the department to proceed after providing a retest report to the appellants. Consequently, the Tribunal held that the proceedings were not barred by res judicata, as the department had complied with the High Court's directions.

2. Whether the findings of the Collector that the appellants had removed 313.823 M.Ts. of charge chrome without accounting for the same and the demand of duty of Rs. 47,61,761.78 is justified:

The appellants challenged the basis of the Collector's findings, arguing that there is no fixed ratio of prime metal to slag due to various factors affecting production. The Tribunal noted that the Collector relied on operational data from FACOR, which the appellants had presented to disprove the department's claims. The Tribunal emphasized that production ratios depend on multiple factors and cannot be generalized. The Tribunal found that the department failed to provide concrete evidence of clandestine removal and that the reliance on data from other companies was arbitrary. Consequently, the Tribunal set aside the demand of duty amounting to Rs. 47,61,761.78.

3. Whether the imposition of penalty under Section 112 of the Customs Act, 1962 is legal and proper:

Given the Tribunal's finding that there was no reliable evidence of clandestine removal of charge chrome, the imposition of a penalty of Rs. 10 lakhs under Section 112 of the Customs Act was deemed unjustified. The Tribunal set aside the penalty, concluding that the appellants had not violated any provisions warranting such a penalty.

Conclusion:

The Tribunal allowed the appeal, setting aside both the demand of duty and the penalty imposed by the Collector. The decision was based on the lack of concrete evidence for clandestine removal and the improper reliance on data from other companies to determine production ratios.