1998 (8) TMI 208 - AT - Central Excise

Summary

Issues Involved:
1. Allegation of suppression of production and clandestine removal of calcium carbide.
2. Inclusion of the value of drums in the assessable value of calcium carbide.

Detailed Analysis:

1. Allegation of Suppression of Production and Clandestine Removal of Calcium Carbide:

The department contended that M/s. Gulf Olefines Ltd. suppressed production and clandestinely removed 1429 MTs of calcium carbide by creating two agencies, M/s. Sandhya Agencies and M/s. Krishna Agencies, which allegedly sold the suppressed production. The appellants argued that these agencies were legitimate and engaged in trading calcium carbide purchased from other manufacturers.

The appellants countered the department's claim that the energy consumption for the production was only 2200 KWH/MT by providing evidence that the actual consumption ranged between 4100 to 4500 KWH/MT, supported by the Central Electro Chemical Research Institute and neighboring units' data. The department's assertion that the raw material used was lime (CaCO3) instead of lime stone (CaO) was refuted by the appellants, who presented documentation and evidence of using lime stone (sea-shells).

The Tribunal found that the department's allegation of clandestine removal was not substantiated due to the following reasons:
- No evidence of seizure of offending goods.
- No documents showing clearance and receipt of clandestinely removed goods.
- Lack of connection between clandestine removal and the two agencies.
- Insufficient power availability to produce the alleged excess quantities.
- Energy consumption studies and evidence from TNEB supported the appellants' claims.
- The department's own application of Rule 173E indicated energy consumption levels consistent with the appellants' claims.

2. Inclusion of Value of Drums in the Assessable Value of Calcium Carbide:

The department argued that the value of drums used for supplying calcium carbide to M/s. DCW should be included in the assessable value, as the drums were sold by the two agencies closely related to M/s. Gulf Olefines. The appellants contended that 60% of the calcium carbide was supplied in bulk tankers, and only 40% in second-hand drums sold by M/s. Sandhya Agency and M/s. Krishna Agency to M/s. DCW. The drums were owned by M/s. DCW and supplied to M/s. Gulf Olefines for packing, making their value excludible from the assessable value under Notification No. 313/77-C.E.

The Tribunal found that the inclusion of the value of drums in the assessable value was incorrect for the following reasons:
- No evidence that the two agencies were mere dummies.
- No evidence that M/s. DCW did not pay for the drums.
- No evidence that M/s. Gulf Olefines received the drums as their property.
- The drums were owned by M/s. DCW, making their value excludible from the assessable value.
- The benefit of Notification 331/77-C.E. was applicable.
- The impugned order incorrectly stated that no calcium carbide was supplied in bulk in tankers, contrary to the show cause notice.

Conclusion:

The Tribunal concluded that:
- The charge of clandestine removal and suppressed production failed.
- The value of drums was not includible in the assessable value of calcium carbide.

The impugned order was set aside, and the matter was remanded to the adjudicating authority for re-computation of duty liability based on these findings. No penalties were to be imposed for clandestine removal or non-inclusion of the value of drums. The appeals were allowed in these terms.