2014 (2) TMI 109 - AT - Central Excise

Disallowance of higher wastage @ 5% for the year - manufacture of footwear - unaccounted stock - Commissioner (Appeals) has allowed the wastage of @ 2.5% of the total purchase of inner boxes - Whether the wastage @ 5% in the 2000-2001, as claimed by the appellant has to be allowed or not - Held that - demand of duty on the basis of short found raw material is on presumption of clandestine removal of the finished goods without any evidence of such clandestine removal and cannot be upheld. In the instant case also I find the entire case of the revenue is based upon the inner boxes purchased by the appellant during the last four or five years. There is absolutely no other evidence on record. In this background, the appellant claim of higher wastage of 5% on account of rain water has to be accepted - Decided in favour of assessee.

Summary

Issues:
1. Confiscation of excess footwear found during inspection.
2. Alleged clandestine clearance of footwear based on inner box purchases.
3. Disallowance of higher wastage percentage claimed by the appellant.
4. Demand of duty based on procurement of PVC Resin without sufficient evidence.
5. Imposition of penalties on the appellants.

Confiscation of Excess Footwear:
The appellant's factory was visited by Central Excise officers who found various varieties of footwear in excess of recorded balance, leading to confiscation. The appellant did not contest this confiscation. The impugned order confirmed the confiscation with an option to redeem on payment of a fine. The judgment upheld the confiscation of excess goods but set aside the confirmation of duty demand on other grounds.

Alleged Clandestine Clearance based on Inner Box Purchases:
The revenue alleged that the appellant used inner boxes in a clandestine manner for clearance of footwear, resulting in a confirmed duty demand. The Commissioner (Appeals) calculated the demand based on the difference between inner boxes purchased and footwear cleared. However, the appellant argued that the demand was not sustainable due to factors like wastage during manufacture. The judgment allowed a reasonable wastage percentage and directed the re-calculation of the demand, reducing the penalty accordingly.

Disallowance of Higher Wastage Percentage:
The appellant contested the disallowance of a higher wastage percentage claimed for a specific year. The judgment noted that the Revenue accepted the lower wastage percentage, and since there was no other evidence supporting clandestine removal apart from inner box purchases, the higher wastage percentage was allowed. The demand of duty in respect of the higher wastage was set aside.

Demand of Duty based on Procurement of PVC Resin:
A demand of duty was confirmed based on the procurement of PVC Resin, with the Revenue contending that excess footwear was manufactured from it. The judgment disagreed, stating there was no evidence to confirm the demand, especially since the excess stock of footwear was confiscated and not contested by the appellant. Therefore, the demand was set aside.

Imposition of Penalties:
As the demand was set aside, the judgment found no justification for imposing penalties on the appellants. Consequently, the impugned order was upheld regarding confiscation of excess goods but set aside for duty demand confirmation and penalty imposition. All appeals were disposed of accordingly.