1999 (9) TMI 176 - AT - Central Excise

Summary

Issues Involved:
1. Allegation of clandestine removal of irregular polished granite slabs.
2. Valuation of the goods for the purpose of duty calculation.
3. Applicability of Notification No. 2/95 for concessional duty.
4. Interpretation of Section 3(1) of the Central Excise Act regarding duty liability.

Issue-wise Detailed Analysis:

1. Allegation of Clandestine Removal of Irregular Polished Granite Slabs:
The Commissioner of Central Excise, Jaipur, confirmed a duty demand of Rs. 1,09,04,145/- against the appellants and imposed a penalty of Rs. 25 lakhs, alleging clandestine removal of 7917.1598 sq. mts. of irregular polished granite slabs. The appellants argued that the shortage found during stock verification was due to breakages and wastages during the manufacturing process, which were not accounted for separately in the RG 1 Register. The officers conducting the stock verification admitted during cross-examination that they did not notice the RG 1 Register for wastages. Given the appellants' claim that the wastage was still lying in the factory, the case was remanded to the jurisdictional Commissioner to verify the existence and accountal of such breakages/wastages.

2. Valuation of the Goods for Duty Calculation:
The appellants disputed the valuation basis adopted by the Commissioner, who used the price of 'galaxy' variety slabs sold by another EOU, Coromandel Granites Ltd., without giving the appellants an opportunity for verification. The Commissioner also rejected the appellants' submitted invoices and affidavits supporting lower valuation. The case was remanded for re-examination of the valuation, considering the appellants' arguments and evidence regarding the quality and price of the goods.

3. Applicability of Notification No. 2/95 for Concessional Duty:
The appellants claimed the benefit of Notification No. 2/95, which the Commissioner denied due to the absence of a certificate from the Development Commissioner. The appellants were given the liberty to satisfy the Commissioner with appropriate evidence that they fulfilled the conditions specified in the notification during the relevant period.

4. Interpretation of Section 3(1) of the Central Excise Act Regarding Duty Liability:
The Commissioner held that the clearance of goods without the permission of the Development Commissioner did not absolve the manufacturer of duty liability. The additional duty leviable under Section 3(1) of the Customs Tariff Act was considered to include customs duty. The Tribunal agreed with the Commissioner's interpretation and observations.

Conclusion:
The Tribunal remanded the case to the jurisdictional Commissioner to:
(a) Verify if the appellants maintained a separate RG 1 Register for breakages/wastages and if the shortage noted can be considered factually tenable.
(b) Determine if there was a practice of storing breakages/wastages in areas other than the production area without due accountal in the RG 1 Register.

The appellants were allowed to present their case afresh on valuation and exemption under Notification No. 2/95 if they could substantiate their claims in the de novo proceedings. The appeal was allowed by remand in these terms.