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2024 (2) TMI 1013 - AT - Central ExciseNon-fulfillment of input output norms as per the allegation of the Department - defective PETs also should be considered as part of the output or not - Applicability of Note 2 of the SION - submission of the Appellant is that in the course of manufacture of PET even hypothetically speaking, no manufacture can produce 100% correct quality quantity of PET - time limitation - HELD THAT - There are force in the Appellant s contention that the Adjudicating Authority should have considered the defect PETs emanating in the course of their final manufactured product towards the SION fulfillment. It is also seen from the records that Note 2 was issued by the Committee after proper verification of the technical details furnished by the Appellant. This Note 2 cannot be treated as a new norm prescribed for the future manufacture only. This simply prescribes the norms for normal production which are being carried out by the Appellant all along. Therefore, the Adjudicating Authority is in error in taking the stand that this Note 2 cannot be applied for the goods manufactured during the past period. Time Limitation - HELD THAT - So far as the Appellant s submissions on limitation are concerned, there are force in the same. The Appellant was registered EOU and was filing the ER-2 and ER-5 Returns regularly and data contained in these Returns have been considered by the Department for issue of the Show Cause Notice. Therefore, allegation of suppression does not sustain. The Department has committed a grave error by issuing the second Show Cause Notice once again invoking the extended period. It is surprising that the Adjudicating Authority has relied on the Nizam Sugar Factory Larger Bench decision, after this LB 1999 (10) TMI 123 - CEGAT, NEW DELHI was overturned by the Hon ble Supreme Court long ago in NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT . In view of these facts, we hold that the confirmed demands cannot sustain for the extended period in respect of the both Show Cause Notices. For the confirmed demand in respect of the normal period, (March 2009 to October 2009), the matter is remanded to the Adjudicating Authority to consider the following facts. (i) Get the details of defective PET manufactured during this period and give the benefit of such quantities holding that they are part of the total manufactured quantity. (ii) Consider the amendment brought in under Note 2 of the SION and give the benefit to the Appellant. After considering these two issues, the net quantification is required to be done. If any demand is confirmed by the Adjudicating Authority after such re-quantification, the Appellant is required to pay the interest - Appeal disposed off.
Issues involved:
The issues involved in the judgment are the non-fulfillment of input-output norms by an Export Oriented Unit (EOU) engaged in the manufacture of Polyethylene Terephthalate (PET) chips, the consideration of defective PET chips in the output towards the norms, the applicability of Note 2 under SION norms, the allegation of suppression, and the invocation of the extended period for demands. Summary: Issue 1: Non-Fulfillment of Input-Output Norms The Appellant, an EOU manufacturing PET chips, faced Show Cause Notices for not meeting Standard Input Output Norms (SION) in two periods. The Adjudicating Authority confirmed demands based on this. The Appellant argued that defective PET chips emerged during production, which should be considered in the output towards SION norms, reducing the confirmed demands substantially. Issue 2: Applicability of Note 2 under SION Norms The Appellant contended that Note 2 under SION norms allowed for adjustments in Diethylene Glycol usage based on other ingredients' quantity. They had approached the SION Committee with the Technology Supplier's letter, leading to the insertion of Note 2. The Adjudicating Authority refused to consider this, citing the timing of the amendment. The Appellant argued for the Appeal's merit based on this. Issue 3: Allegation of Suppression and Extended Period The Appellant argued that there was no suppression as data was gathered from their returns. They challenged the invocation of the extended period for demands, citing legal precedents. The Adjudicating Authority's reliance on a decision overturned by the Supreme Court was also highlighted. The Tribunal found in favor of the Appellant, noting that defective PET chips should be considered in SION fulfillment. The Adjudicating Authority erred in not applying Note 2 retrospectively. Allegations of suppression were dismissed, and demands for the extended period were deemed unsustainable. The matter was remanded for re-quantification considering defective PET quantities and the SION amendment. No penalties were imposed due to interpretational difficulties.
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