2000 (6) TMI 300 - AT - Central Excise

Issues Involved:
1. Alleged illicit removal of Terry Viscose Yarn without payment of duty.
2. Moisture loss and its impact on stock discrepancies.
3. Validity of invoking the extended period for issuing the show cause notice.
4. Consideration of previous orders and their relevance to the current case.
5. Adequacy of evidence supporting the alleged contraventions.

Detailed Analysis:

1. Alleged Illicit Removal of Terry Viscose Yarn without Payment of Duty:
The appellant was accused of contravening Rule 9(1) read with Rule 173F of the Central Excise Rules by illicitly clearing 3723.550 kgs. of Terry Viscose Yarn without issuing any Central Excise pass and without payment of central excise duty amounting to Rs. 37,235.50. The show cause notice issued on 20-4-93 alleged that the appellant failed to determine and pay the appropriate central excise duty on the illicitly cleared yarn. The impugned order confirmed the demand and imposed a penalty of Rs. 10,000/-.

2. Moisture Loss and its Impact on Stock Discrepancies:
The appellant argued that the discrepancy in the RG 1 register entry and the actual stock was due to moisture loss, which is a recognized phenomenon in the production of Terry Viscose Yarn. The appellant cited technical literature indicating a permissible moisture content of about 18% and claimed that the actual moisture loss in this case was 11.76%. The impugned order, however, did not accept this explanation, stating that no evidence was produced to support the claim that such a set-off for moisture loss was permitted by the Jurisdictional Assistant Collector in 1988.

3. Validity of Invoking the Extended Period for Issuing the Show Cause Notice:
The appellant challenged the invocation of the extended period under Section 11A of the Central Excise Act, arguing that the show cause notice was issued 18 months after the period in question, and that the department was aware of the appellant's activities since 1988. The impugned order did not address the question of time-bar, which is a question of law. The Tribunal found that the invocation of the extended period could not be upheld, as the department was aware of the appellant's activities since 1988, and there was no evidence of suppression, wilful misstatement, or fraud.

4. Consideration of Previous Orders and Their Relevance to the Current Case:
The appellant referred to Order-in-Original No. 49/88 dated 13-4-88, which dealt with a similar issue of moisture loss and stock discrepancies. In that order, it was observed that the appellant was required to pay central excise duty on the weight of yarn recorded in the RG 1 register, including any moisture content. The Tribunal noted that the previous order did not support the appellant's case in the current matter, as the duty liability was fixed on the shortage, and the explanation regarding moisture content was not accepted for want of statutory records.

5. Adequacy of Evidence Supporting the Alleged Contraventions:
The Tribunal found that the impugned order did not provide positive material evidence to support the allegation of illicit clearance. The appellant's defense of moisture loss was supported by technical literature, and the probability weighed more in favor of the appellant. The Tribunal concluded that the alleged illicit clearance was not made out, and the issue of gate pass issuance and duty determination did not arise.

Conclusion:
The Tribunal set aside the impugned order, finding that the appellant's explanations regarding moisture loss were plausible and supported by technical literature. The invocation of the extended period for issuing the show cause notice was deemed invalid, and the alleged contraventions were not substantiated by adequate evidence. The appeal was allowed with consequential relief as per law.

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