2000 (11) TMI 1169 - AT - Central Excise

Summary

Issues:
1. Determination of permissible invisible loss in manufacturing process.
2. Availability and consideration of cost auditor's report.
3. Assessment of undervaluation of scrap cleared by the appellant.
4. Assessment of rejected ball bearing ring.

Analysis:

Issue 1: Determination of Permissible Invisible Loss
The judgment primarily revolves around the determination of invisible loss permissible in the manufacturing process of steel forgings. The appellant claimed an average of 8% invisible loss over a five-year period, while the Commissioner calculated it to be 5.5%. The cost auditor's report indicated an average invisible loss of about 8% based on a sample of 12 products. The Tribunal found discrepancies in the Commissioner's calculation methodology and decided to remand the question for further assessment based on the cost auditor's report, allowing the appellant the opportunity to challenge the findings.

Issue 2: Availability and Consideration of Cost Auditor's Report
During the proceedings, the appellant raised concerns about the unavailability of the cost auditor's report, which was appointed under Section 14A of the Act. Upon the Tribunal's request, the report was submitted, indicating an average burning loss of 5.48% of the cut weight of raw material received, aligning with the appellant's claim of an 8% invisible loss. The Tribunal emphasized the importance of considering this report in determining the invisible loss accurately.

Issue 3: Assessment of Undervaluation of Scrap
The Commissioner enhanced the value of scrap cleared by the appellant, which was declared below Rs. 6 per kg, without providing sufficient reasons for the valuation. The Tribunal noted that different kinds of scrap were sold at varying prices, and in the absence of evidence of deliberate undervaluation, the demand for duty on the undervalued scrap was deemed unsupported by substantial evidence, leading to a decision in favor of the appellant on this issue.

Issue 4: Assessment of Rejected Ball Bearing Ring
The judgment also addressed the assessment of rejected ball bearing rings sold by the appellant at a price lower than the Commissioner's valuation. The Tribunal disagreed with the Commissioner's decision to enhance the value without clear justification, highlighting that the rejected parts contained significant materials and processes, indicating a commercially viable price. The matter was remanded for a fresh examination to determine the appropriate valuation, along with a reassessment of penalty and confiscation of assets.

In conclusion, the appeal was disposed of, emphasizing the need for a thorough reassessment of the invisible loss, valuation of scrap, and rejected ball bearing rings, ensuring a fair and evidence-based decision-making process.