1997 (12) TMI 206 - AT - Central Excise

Summary

Issues:
Challenge to order-in-original confirming duty demand and imposing penalty based on alleged evasion of duty through fraud, wilful suppression, and mis-statement of facts.

Analysis:
The appellants, engaged in the manufacture of cotton yarn, were accused of clearing goods without payment of duty by resorting to fraudulent practices. The Collector of Central Excise issued a Show Cause Notice alleging duty evasion amounting to Rs. 1,88,066.15 for clearances made between 1982 to 1985. The appellants were also accused of misrepresenting duty paid goods and shortages in yarn stock. The Addl. Collector adjudicated the matter, confirming the duty demand and penalty.

The appellants argued that the alleged shortages were due to processing losses, particularly 'hard' waste, which they claimed to have accounted for in their returns and registers. They contended that the Department was aware of the processes involved and there was no suppression or fraud on their part. They emphasized that the 'hard' waste was exempt from duty and should have been deducted from the yarn stock. They also raised the issue of limitation, asserting that the Show Cause Notice was time-barred.

The Department, however, maintained that the appellants cleared excess goods without paying duty and raised concerns about the delay in the appellants' response to the Show Cause Notice. The Department argued that the information provided earlier was incomplete and required further investigation, justifying the issuance of the SCN beyond the normal limitation period.

The Tribunal examined the contentions of both parties. Regarding limitation, it was observed that the extended period for demand can be invoked in cases of fraud, misrepresentation, or suppression. The Tribunal found that the appellants had failed to inform the Department about the discrepancies in yarn stock during the relevant period, indicating suppression of facts. Therefore, the extended period was deemed applicable.

On the merits, the Tribunal noted the appellants' admission of 'hard' waste occurring during processing but rejected their explanation for not deducting the waste from the yarn stock. The Tribunal upheld the Addl. Collector's decision on confirming the duty demand based on the shortages identified during stock taking.

In conclusion, the Tribunal upheld the lower authority's decision, rejecting the appeal and confirming the duty demand and penalty imposed on the appellants for alleged evasion of duty through misrepresentation and failure to account for processing losses adequately.