1994 (8) TMI 130 - AT - Central Excise

Issues Involved:
1. Alleged clandestine manufacture and removal of MS ingots.
2. Validity and reliability of documentary evidence.
3. Applicability of Notification 217/86 for captive consumption.
4. Confirmation of duty demand and imposition of penalty.

Detailed Analysis:

1. Alleged Clandestine Manufacture and Removal of MS Ingots:
The case revolves around the appellant's alleged clandestine manufacture and removal of 4724.35 MTs of MS ingots between December 1983 to September 1984 and August 1985 to July 1987. The Collector of Central Excise confirmed a duty demand of Rs. 14,55,709.80 and imposed a penalty of Rs. 3,75,000/-. The appellant contended that the records seized were in-process records and not reflective of actual production, arguing substantial quantities were used for captive consumption.

2. Validity and Reliability of Documentary Evidence:
The judgment meticulously examines various documents:

(i) Scrap Book and Scrap Memo:
- Department's Case: Two sets of raw material accounts were maintained, with discrepancies in the Saraswati Scrap Book.
- Defence: The Saraswati Scrap Book recorded scrap for verification, not accepted scrap.
- Finding: The appellant's explanation was unconvincing due to lack of evidence for scrap rejection and return.

(ii) Log Sheets:
- Department's Case: Log sheets detailed daily production, signed by supervisory staff.
- Defence: Log sheets were rough estimates, not reflecting defective materials.
- Finding: Log sheets were detailed and corroborated by other documents, proving actual production.

(iii) Bill Book:
- Department's Case: Charges paid to contractors matched log sheet entries.
- Defence: Document was not incriminating.
- Finding: Discrepancies in production figures were not explained by the appellants.

(iv) Chemical Analysis Report Register:
- Department's Case: Matched log sheet entries.
- Defence: Weight estimates were not authentic.
- Finding: Explanation was unsatisfactory; documents matched due to inter-departmental information sharing.

(v) Production and Despatch Register:
- Department's Case: Tally with log sheets and private records.
- Defence: Maintained personally by supervisory staff, not relevant for RG-I register.
- Finding: Detailed and reliable, corroborated with other documents.

(vi) Weigh-Bridge Register:
- Department's Case: Date-wise vehicle entries, few accounted in RG-I register.
- Defence: Entries unexplained due to unknown captive consumption quantity.
- Finding: Reliable, reflected in other documents.

(vii) Despatch Slips and Daily Despatch Report:
- Department's Case: Tally with production and despatch books, varied from RG-I figures.
- Defence: Slips did not represent actual despatch; genuineness disputed.
- Finding: Documents related to clearances of ingots.

(viii) Internal Gate Passes:
- Department's Case: Used for captive consumption without duty discharge.
- Defence: Used in manufacture of duty-paid forgings, exempt under Notification 217/86.
- Finding: Notification benefit applicable for captively consumed ingots.

3. Applicability of Notification 217/86 for Captive Consumption:
The appellant claimed exemption under Notification 217/86 for ingots used in manufacturing forgings. The adjudicating authority erred in denying this benefit. The notification exempts goods used within the factory for manufacturing final products, provided the final products are not exempt from duty. The appellant's claim was supported by internal gate passes and the chart provided, showing 3985.700 MTs of ingots transferred for forging.

4. Confirmation of Duty Demand and Imposition of Penalty:
The tribunal confirmed the duty demand on 738.859 MTs of MS ingots after accounting for captively consumed quantities and runners and risers. The penalty was reduced to Rs. 25,000/- from Rs. 3,75,000/-.

Conclusion:
The appeal resulted in a partial relief for the appellants with the duty demand confirmed on a reduced quantity and a significant reduction in the penalty imposed. The tribunal's detailed examination of documentary evidence and application of Notification 217/86 were pivotal in the final judgment.

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