2014 (7) TMI 570 - AT - Central Excise

Duty demand - Shortage in stock - input output ratio - procurement of duty free goods for export - general of wastage - manufacture of EAU De Perfume containing alcohol 78% - Held that - there is no evidence adduced by the department that any quantity of shortage was found in the Appellant s premises. Each & every raw material and inputs procured duty free have been fully utilized in the manufacture of export goods, wastage generated during the process of finished exempted goods has been fully accounted for and the duty has been paid by the Appellants. The duty has been demanded on shortage/wastage whereas shortage of goods would only mean that there has been either clandestine manufacture and utilization of goods not declared to the authorities or that there has been clandestine clearance of raw materials or inputs as such. There is no such charge of either in the Show Cause Notice or in the Order-in-original. Wastage generated during the course of manufacture of the finished goods out of raw material procured duty free for export with permission of the department, however the Appellants have not proved the input output ratio 100 100 but Appellants have already paid duty on the price of the wastage occurring in the course of manufacturing, hence there is no short payment of duty on this ground. I further find that wastage/shartage occurred during the course of the manufacture of the finished goods for export is also covered under the para 2.2.2. part VI Chapter 7 Central Excise Manual, as the wastage is genuine has to be accepted as unaccounted loss, moreover the Department has not proved anywhere any clandestine removal of raw material or finished goods, therefore the demand is not sustainable under Section 11A of Central Excise Act, 1944. - Decided against Revenue.

Summary

Issues: Central Excise duty recovery on shortage/wastage, interest recovery, penalty imposition under Central Excise Act, 1944.

Central Excise Duty Recovery on Shortage/Wastage:
The case involved the manufacture of EAU De Perfume exempted under specific conditions. The appellant did not pay Central Excise duty on inputs amounting to a certain sum due to shortage/wastage during production. A Show Cause Notice was issued for duty recovery, interest, and penalty. The Adjudicating Authority confirmed the demand, but the Commissioner (Appeals) accepted the appellant's stand based on Tribunal decisions. The appellant contended they followed the required conditions for duty-free inputs but were accused of not following specific rules leading to the duty demand. The input-output norms from the Exim Policy were crucial in determining duty liability, which the department misinterpreted. The appellant argued that wastage should be considered genuine and accounted for, not as a duty evasion.

Interest Recovery:
Interest recovery was also a point of contention under Section 11AB of the Central Excise Act, 1944. The appellant's compliance with input-output ratios and procedural requirements for duty-free procurement was crucial in determining the interest liability. The Adjudicating Authority's interpretation of the input-output norms and the appellant's utilization of raw materials duty-free were central to the interest recovery issue.

Penalty Imposition under Central Excise Act, 1944:
The imposition of penalties under Rule 25 of the Central Excise Rules, 2002 was another aspect of the case. The Commissioner (Appeals) allowed the appeal based on the appellant's fulfillment of conditions and the absence of evidence supporting duty evasion or clandestine activities. The Revenue's appeal reiterated the requirement for a 100:100 input-output ratio but failed to provide reasons to disregard specific provisions. The absence of evidence of duty-free input misuse or clandestine activities led to the rejection of the revenue's appeal.

In conclusion, the judgment revolved around the duty recovery on shortage/wastage, interest recovery, and penalty imposition under the Central Excise Act, 1944. The appellant's compliance with input-output norms, procedural requirements, and the genuineness of wastage were pivotal in determining the duty liability. The misinterpretation of rules and the absence of evidence supporting duty evasion or clandestine activities favored the appellant, resulting in the rejection of the revenue's appeal.