1994 (4) TMI 200 - AT - Central Excise

Issues: Allegation of clandestine production and clearance of Cement clinkers without payment of duty, duty remission under Rule 49 of Central Excise Rules, 1944, violation of principles of natural justice, suppression of facts, longer period of limitation under Section 11A of Central Excises and Salt Act, 1944, duty demand, penalty reduction.

Analysis:
1. The appeal challenged the order of the Additional Collector of Central Excise, Belgaum, which imposed a duty of Rs. 1,44,000 on the appellant for allegedly not mentioning 1500 MT of Cement clinkers in their records in August 1986 and clearing them without payment of duty. The appellant claimed duty remission under Rule 49 of the Central Excise Rules, 1944, citing loss due to floods. The appellant argued that the adjudicating authority's decision was flawed for not notifying them about correspondence with the Insurance Company, leading to a biased decision. The appellant contended that the Department was aware of the loss of clinker due to floods as it was mentioned in their annual report and balance sheet. The appellant also raised concerns about the lack of specific mention of suppression in the show cause notice. The Tribunal found the appellant's arguments unconvincing, as no evidence was presented to prove the loss of clinker by floods, and no production register or records were maintained to support their claims. The Tribunal upheld the duty demand, citing suppression of facts and lack of evidence to support the appellant's contentions. The penalty was reduced to Rs. 5,000 in consideration of the circumstances.

2. The Tribunal deliberated on the invocation of the longer period of limitation under Section 11A of the Central Excises and Salt Act, 1944, in light of the evidence and arguments presented. The Tribunal disregarded the letter from the Insurance Company, focusing on the lack of proof of loss due to natural causes like floods. The appellant failed to inform the Central Excise Department about the alleged loss, as required, and did not maintain production records. The Tribunal held that the charge of suppression was valid, as no documents were provided to substantiate the claim of loss due to natural causes. The appellant's failure to maintain records and inform authorities about the loss led to the conclusion that clinkers were cleared without duty payment. The Tribunal confirmed the duty demand but reduced the penalty to Rs. 5,000. The appellant's argument regarding the absence of suppression in the show cause notice was rejected, emphasizing the lack of evidence supporting the claim of loss due to floods.

3. The Tribunal emphasized the appellant's obligation to prove the loss of goods by natural causes or unavoidable accidents to claim duty remission under Rule 49 of the Central Excise Rules, 1944. The appellant's plea of loss during floods was not supported by sufficient evidence, as no contemporaneous records or notifications to authorities about the loss were provided. The Tribunal noted the appellant's failure to maintain production records and the absence of an explanation for this lapse. Consequently, the Tribunal held that the appellant's clandestine production of clinker was established, justifying the duty demand. The penalty was reduced to Rs. 5,000 considering the industry's recession. The appeal was dismissed, except for the penalty modification, maintaining the duty demand based on the lack of evidence supporting the claim of loss due to natural causes.

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