1994 (12) TMI 205 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty under the Central Excises & Salt Act, 1944.
2. Allegations of duty evasion in the manufacture of rexine cloth.
3. Discrepancies in the Department's test results and the petitioners' explanations.
4. Levying duty based on chlorinated paraffin wax as a raw material.
5. Lack of adverse findings on the purchase of main raw materials.
6. Denial of opportunity for cross-examination violating principles of natural justice.
7. Small scale unit status and financial difficulties of the petitioner company.

Analysis:
1. The petitioners sought a waiver of pre-deposit of duty and penalties amounting to Rs. 37,56,849.60. The initial demand was significantly reduced from over Rs. 1.2 crores to the final amount. The main allegation was regarding the use of PVC resin in coating rexine cloth, with discrepancies in the Department's test results and the petitioners' explanations. The petitioners argued that their manually operated unit lacked precision instruments, affecting output calculations.

2. The Department levied duty based on chlorinated paraffin wax as a raw material, alleging evasion. The petitioners contended that the wax was purchased independently by an employee without the company's involvement. The petitioners also highlighted that the cotton cloth, the primary raw material, was purchased from reputable mills without adverse findings.

3. Concerns were raised about the denial of an opportunity for cross-examination of witnesses, leading to a violation of natural justice principles. The petitioners emphasized that buyers of rexine cloth retracted their initial statements, but the opportunity for cross-examination was not provided, impacting the fairness of the proceedings.

4. The petitioners' small scale unit status and financial difficulties were underscored, supported by a certificate identifying the unit as sick. The State Bank of India provided financial assistance to revive the unit, indicating its precarious financial position. The balance sheet revealed significant outstanding loans and accumulated losses, reflecting the financial strain on the company.

5. Considering the arguments presented and the financial position of the petitioner company, the Tribunal directed a pre-deposit of Rs. 4.00 lakhs by the company, Rs. 5000 each by the Managing Director and another individual, and Rs. 1000 each by other petitioners. Compliance was required by a specified date, with the balance of duty and penalty waived pending appeal. Stay of recovery was granted subject to compliance, with a follow-up scheduled for reporting on compliance.