2014 (11) TMI 864 - HC - Central Excise

Duty demand - Difference in loss - appellant is receiving lubricating oil from M/s. IOBL, Kolkata either on payment of duty or without payment of duty under bond - assessee were repacking the same into small packs to be sold in the market under their own brand and style - Allahabad High Court dismissed the appeal of the Revenue against the decision of the CESTAT NEW DELHI 2014 (6) TMI 618 - CESTAT NEW DELHI holding that no substantial question of law arises - Where Tribunal in its impugned order had held that difference on account of loss or shortage of lubricating oil were to the tune of 0.44% to 1.78%, whereas tolerance range is 1.4% to 1%. There is no evidence of clandestine removal in absence of which no duty can be demanded on the waste or loss.

Summary

Issues:
1. Whether duty on goods lost during manufacturing can be condoned without filing an application for remission.
2. Can shortage of dutiable goods be considered as clandestine removal without proper explanation?
3. Are duty paid/bonded lubricating oil found short liable to central excise duty?

Analysis:
1. The appeal by the Revenue challenged a decision of the Customs, Excise and Service Tax Appellate Tribunal confirming the order of the Commissioner (Appeals) regarding the condonation of duty on goods lost during manufacturing. The Commissioner (Appeals) held that the loss of goods was explained as a process loss, and there was no evidence of clandestine removal. The Tribunal upheld these findings, emphasizing that the shortage/wastage was not used in the manufacture of final products without payment of duty. Consequently, the Tribunal dismissed the appeal, stating that no substantial question of law arose from the pure finding of fact.

2. The second issue pertained to the consideration of shortage of dutiable goods as clandestine removal in the absence of a proper explanation. The Commissioner (Appeals) had determined that the loss of goods varied within permissible limits under the Standard Weights and Measures Rules, attributing it to process loss. The Tribunal affirmed these factual findings, highlighting that there was no evidence indicating the diverted use of the shortage in the production of final goods without duty payment. Consequently, the appeal was dismissed based on the established facts.

3. The final issue revolved around the liability of duty paid/bonded lubricating oil found short to central excise duty. The Commissioner (Appeals) had ruled in favor of the appellant, explaining that the loss of lubricating oil was within permissible limits and was accounted for as process loss. The Tribunal concurred with these findings, emphasizing that there was no indication of the diverted use of the short lubricating oil in the production of final goods without payment of duty. As a result, the appeal was dismissed based on the factual findings and no substantial question of law was found to arise.

In conclusion, the judgment addressed the issues of condonation of duty on lost goods, consideration of shortage as clandestine removal, and the liability of short lubricating oil to central excise duty. The decision was based on factual findings and absence of evidence supporting clandestine activities, leading to the dismissal of the appeal by the Revenue.