9911796707
TMI Blog2003 (7) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... counting for their raw material purchases/procurements and was consuming such unaccounted raw materials for production and clearance of Latex Foam Products in a clandestine manner, simultaneous searches were conducted in various premises. As a consequence of the said search and subsequent investigation, the aforesaid SCN has been issued. It proposes to demand duty of Rs. 88,09,850/- (Rs. 78,60,502/- as BED/CENVAT and Rs. 9,49,348/- as SED). It also proposes to adjust an amount of Rs.20 lakhs deposited by them during investigation against the proposed demand amount. It further proposes confiscation of latex foam products of a value of Rs. 1,34,965/-, and 22 drums of centrifuged latex valued at Rs. 1,13,878/- both seized on 18-12-2000 at the factory premises, and since released provisionally on execution of B.11 bonds with suitable Bank Guarantees. Interest is demanded u/s. 11AB of the Central Excise Act, 1944 and penalties are proposed under the provisions referred to in the SCN. In addition, the SCN also proposes confiscation of goods seized from the premises of M/s. Ruby Sales Corporation, Royal Trading Company, New Rexin Stores and Rexin House and released provisionally with suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to be of prime products, overlooking the fact that damaged and defective goods could occur in any process of manufacture of these goods. (2) The value adopted in SCN to quantify the aggregate value of clearances should be deemed to be cum duty value, as held by various judicial forums, and the correct assessable value worked back after extending abatement in terms of Section 4(4)(d)(ii) of the Central Excise Act, 1944. It is contended that if these two factors are conceded, the aggregate value of clearances during the year 1999-2000 (the first year of clandestine manufacture and clearance alleged in the SCN) will come down to less than Rs. 3 crores, entitling them to continue to avail small scale benefits under Notification 8/90 during the subsequent year 2000-2001 (that is, the second year of clandestine manufacture and clearance as per SCN). 7. The Bench has considered the pleas raised in the application as well as during the hearings, and also perused the relevant records including the report of Commissioner (Investigation) of this Bench. 8. Taking up first, the contention of emergence of defective goods as seconds and rejects, it is found that according to Para 40.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of variation in price between prime goods and seconds/rejects. On applying the value of prime quality items to that of seconds/rejects for the subsequent periods Nov. 2000 to March 2001, April 2001 to March 2002 and April 2002 to January 2003 based on accounted clearances, it was found that the variation works out only to 7.11%, 8.3% and 5.21% respectively as against 10.39% claimed by the applicant in the application as shown in the Annexure IV. Hence, in view of the above and in the absence of any evidence excepting a generalized certificate of the Rubber Board to the effect that the production of low quality (seconds) latex foam/rejections will be less than 20% even in a good factory, a margin of 5.21% may be allowed from the gross value turnover/alleged in the SCN, if the fact of production/sale of rejects/seconds by the applicant even during the relevant period is accepted. 11. As against the margin of 5.21% recommended by Commissioner (Inv.), which is the lowest in the three comparative periods namely, Nov. 2000 to March 2001, 2001-2002 and April 2002 to January 2003 during which separate accountal of seconds/rejects was maintained by the applicant and was studied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of clearances for the period 1-4-99 to 9-3-2003, the SCN has adopted the assessable value of statutorily accounted clearances as reflected in their official dispatch invoices. However, with effect from 10-3-2000, the assessable value of the Latex Foam products has been calculated in the SCN by reducing 5% from the prices in the price list circulated by ARP, as per the admitted prevailing practice for determining the purchase price (Para 40.2 of SCN). On the other hand, the Commissioner (Inv.) has reported that Though there is evidence regarding the money collected as sale proceeds from 1-4-2000 to 9-3-2000, the same cannot be correlated with the quantity cleared. Besides, the amounts shown to have been collected are in round figures. Hence, it may not be possible to identify the exact amount realised towards unaccounted sales. After, 9-3-2000, the applicant has not followed assessable value based on the price list viz. List price less 5% for the accounted clearances as could be seen from the invoices raised for clearances of duty paid goods after 9-3-2000. Further, it is seen that the price list is based on the letter dated 15-11-2000 of M/s Ruby Sales Corporation, one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid Worksheet IV handed over on 1-7-2003 on the basis of this value. 17. However, it is observed that the aforesaid Worksheet No. IV of the applicant also contains certain mistakes, as pointed by the Respondent Commissioner s report dated 2-7-2003 submitted in pursuance of the direction of the Bench during the hearing on 1-7-2003, asking the revenue s representative to verify and submit a report on the accuracy of applicant s aforementioned Worksheet No. IV. The said Worksheet No. IV divides the clearances in excess of Rs. l crore during 2000-01 between clearances of goods falling under sub-headings 9404 and 4008.19 carrying duty rates of 24% and 16% w.e.f. March 2000 in the ratio of 53% and 47%. On the other hand, the Respondent Commissioner has worked it out in the ratio 57.52% and 42.48%, ostensibly, on the basis of total clearances during the year. The Respondent Commissioner s report therefore reports a duty liability of Rs. 53,22,727/- (Rs. 46,54,487/-+ Rs. 6,68,240/-). 18. But the Bench also observes that even the Respondent Commissioner s report carries two mistakes. One is that for the clearances during 1999-2000, in excess of Rs. 1 crore duty has been calculated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the Bench pointed out the lack of evidence for price realization such as invoice. He also readily accepted a reduced percentage of abatement on account of manufacture of seconds/rejects, as against 10.87% initially claimed in the application. Though even in the Worksheet IV handed over at the time of hearing on 1-7-2003, the applicant admitted a lesser duty liability than that demanded in the SCN, it is in excess of the amount found by this Bench as due as stated in Para 18 above. The Bench finds that admission initially of a duty liability lesser than arrived at by this Bench is on account of misconception of facts and law. This is evident when viewed from the point that the applicant had owned up the quantum of clandestine clearances. Accordingly, the Bench finds that the applicant has made a full and true disclosure of duty liability as per his perception and has also fully co-operated with this Bench. M/s. Ashoka Rubber Products has thus become eligible for immunity from penalties under Central Excise Act and Rules and prosecution under Central Excise Act. However, in the light of clear omission to pay duty at the appropriate time, the Bench holds that the applicant shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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