2001 (3) TMI 595 - AT - Central Excise

Issues Involved:
1. Whether the quantity of rubber compound waste cleared by the manufacturer was abnormally high and if it was actually tread rubber cleared in the guise of waste.
2. Whether the differential duty demanded by the Assistant Commissioner was correct.
3. Whether the manufacturer had properly intimated the Department about the quality and marketability of the tread rubber.
4. Whether the records of personal hearing and the voluntary statement made by the manufacturer were accurate and reliable.
5. Whether the manufacturer maintained proper accounts for tread rubber and waste/scrap.
6. Whether the Commissioner (Appeals) correctly annulled the Order-in-Original and ordered a refund of the pre-deposit.

Issue-wise Detailed Analysis:

1. Abnormal Quantity of Waste Cleared:
The Superintendent of Central Excise observed that the quantity of rubber compound waste cleared by the manufacturer was abnormally high compared to the production of tread rubber. The manufacturer cleared 11,051 Kgs of waste during 12/94 to 3/95 and 5,043 Kgs during 4/95. The Assistant Commissioner believed that tread rubber was being cleared in the guise of waste and demanded differential duty. However, the Commissioner (Appeals) found that the waste rubber compound was generated and sold on the same dates as recorded in the Form IV Account and RG 1 Account, and the returns were accepted by the Department. The Commissioner (Appeals) concluded that the investigators could not prove that the waste was actually tread rubber.

2. Differential Duty Demand:
The Assistant Commissioner confirmed the demand for differential duty of Rs. 75,427/- on the clearances of tread rubber described as waste. The Commissioner (Appeals) annulled this order, stating that there was no evidence to prove that the goods sold as waste were actually tread rubber. The appellate tribunal upheld the Commissioner (Appeals)'s decision, noting that the central excise law requires marketability to establish the levy, and there was no evidence that the product sold was accepted in the market as tread rubber.

3. Intimation to the Department:
The manufacturer did not inform the Department that the tread rubber produced was unfit for consumption or marketing, nor did they apply for remission of duty under Rule 49 of the Central Excise Rules, 1944. The Commissioner (Appeals) noted that the manufacturer had admitted to producing low-quality tread rubber sold as waste. The appellate tribunal found that the non-filing of a remission application could lead to a penalty but did not determine the nature of the goods cleared.

4. Accuracy of Records and Statements:
The manufacturer claimed that the record of personal hearing was not a true version of what was stated before the original authority. The Commissioner (Appeals) found the record of personal hearing and the voluntary statement to be factually incorrect and unreliable, extending the benefit of doubt to the manufacturer. The appellate tribunal upheld this finding, noting that no material evidence was provided to challenge the Commissioner (Appeals)'s conclusions.

5. Maintenance of Proper Accounts:
The manufacturer did not maintain a separate folio in RG 1 for waste and scrap, instead accounting for waste in the tread rubber folio. The Commissioner (Appeals) found that the waste rubber compound was recorded in Form IV and RG 1, and the returns were accepted by the Department. The appellate tribunal agreed that the failure to maintain separate accounts did not change the nature of the goods sold as waste.

6. Annulment of Order-in-Original and Refund:
The Commissioner (Appeals) annulled the Order-in-Original Nos. 50/97 and 51/97, dated 26-5-1997, and ordered a refund of the pre-deposit of Rs. 38,000/- to the manufacturer. The appellate tribunal confirmed the Commissioner (Appeals)'s order regarding the duty but partially allowed the appeal concerning the penalty. The tribunal revived the penalty of Rs. 500/- under Rule 173Q for non-filing of the remission application and non-transfer of RG1 entries before clearance.

Conclusion:
The appellate tribunal upheld the Commissioner (Appeals)'s decision to annul the differential duty demand and refund the pre-deposit, while partially allowing the appeal by reviving a penalty of Rs. 500/- for procedural lapses. The tribunal confirmed that the goods cleared were waste and not tread rubber, based on the lack of evidence to prove otherwise.

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