1997 (7) TMI 273 - AT - Central Excise

Summary

Issues Involved:
1. Utilization of accumulated credit u/r 56A post Notification 182/83.
2. Demand of duty on the shortage of 8.5 kilos of texturised yarn.
3. Alleged surreptitious production and removal of 30,207 kilos of texturised yarn.

Summary:

1. Utilization of Accumulated Credit u/r 56A Post Notification 182/83:
The first issue was whether the credit accumulated by the assessees u/r 56A could be utilized for payment of duty after 16-7-1983, following the amendment by Notification 182/83. The Collector held that the accumulated credit would lapse, leading to a demand for duty of Rs. 9,85,427.82. However, the Tribunal, referencing judgments from various High Courts, including Andhra Pradesh High Court in Agarwal Industries Ltd. and Karnataka High Court in Modern Mills Ltd., concluded that the utilization of the accumulated credit was permissible. Consequently, the demand for Rs. 9,85,427.00 was not sustained.

2. Demand of Duty on Shortage of 8.5 Kilos of Texturised Yarn:
The second issue involved a demand for duty on a shortage of 8.5 kilos of texturised yarn. The assessees argued that the shortage represented waste mixed with general floor waste and was accounted for in statutory books. They also claimed that such yarn was exempt from duty u/s Notification 178/83. The Tribunal accepted these contentions and held that the demand for duty on this quantity was not sustainable.

3. Alleged Surreptitious Production and Removal of 30,207 Kilos of Texturised Yarn:
The third issue concerned the alleged surreptitious production and removal of 30,207 kilos of texturised yarn, based on internal office memoranda. The Tribunal found that the internal communications lacked a specific time frame and were insufficient as direct evidence. The Collector's reliance on these memoranda without corroborating statements from concerned persons was flawed. The Tribunal noted that no investigations were conducted in the sister unit, UIP, which was crucial for establishing clandestine removal. Additionally, both units were under physical control, and the extended period of demand could not be sustained as per a previous Tribunal order. Therefore, the demand was hit by limitation.

Conclusion:
The Tribunal allowed the appeal, setting aside the orders of confirmation of demand and imposition of penalty, and ordered appropriate relief.