9911796707
TMI Blog2000 (5) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the above proposal, notice also proposed to confirm demand of Rs. 4,73,832.05 on the ground of their consignment agents have realised extra amount from their customer on account of miscellaneous charges. However these charges have been dropped by the Commissioner vide his impugned order and as such are not the subject matter of the present appeal. Apart from confirming the above amount of duty, notice also proposed imposition of penalty upon the appellants and confirmation of small amount of Rs. 7,667.60 on account of shortages on their final products detected during verification. 2.2 The above charges were mainly based upon the ground that the appellants had suppressed actual production of their finished goods by showing inflated production of generated scrap which in turn was based upon two statements of the appellants' representatives which was to the effect that the scrap generated in the factory was to the tune of about 23%. Based upon this statement, the Commissioner has concluded that the appellants were not maintaining proper records of their finished products and after allowing the maximum percentage of generation of scrap to the tune of 23%, he has recalculated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been determined in the appellants case and therefore the action initiated without determination but based only on emergence of scrap is contrary to the provisions of law. They also produced a letter dated 6-12-1989 written by M/s. SALCO Extrusion Pvt. Ltd. address to the Chairman, Technical Committee of All India Aluminium Extrusion Manufacturers Association indicating that there cannot be a fixed percentage of scrap and in a particular manufacturers' case, recovery percentage may vary from 60% to 70% thereby giving scrap generation ratio of 30% to 40%. A reference was also made by them to proforma invoice of M/s. Cheng-Hua Machinery Co. Ltd., Taiwan who have referred specification of their aluminium extruded machines giving the "Eft of Extrusion = 70%". As such, the appellants contended that inasmuch as in a new machine, the ratio of recovered percentage is 70%, it should be much less in their case of old machinery. As regards the shortages of the sections during the course of searching of their factory, they have submitted that it is a small percentage as compared to their huge production and has to be ignored depending upon the number of factors. As regards the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities to even allege that one kilogram of finished products was removed from the factory premises by the appellants without payment of appropriate Central Excise duty. He also submits that the order which is based upon on assumptions and presumptions without any evidence in support thereof, is patently erroneous, illegal, invalid and bad in law. He submits that the Commissioner has relied upon two statements of the non-technical persons but has very conveniently ignored the statements of their production-in-charge which gives scrap generation ratio upto 30%. He submits that the Production Manager, Shri S.N. Pandey, is the most qualified person and if the calculation of actual production is done in terms of scrap generation ratio as given by him, the allegations would not stand against the appellants. In support of his above submissions, he relied upon a number of decisions of the Tribunal. He also submits that the entire scrap manufactured by the appellants and recorded in RG-I Register, was again are used in the manufacture of the final product in the appellants' own factory and there was no sale of scrap from the factory. As such, the appellants do not get benefited by showing hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... types of evidences. Firstly the assessee has not been maintained the statutory records correctly but have been showing imaginary figures. Secondly, the calculations of the production of the final product, have been made by taking the ratio of the scrap generation to be 23% based upon the statements of Shri D.P. Shah, Director and Sri V.K. Balachandran, Supervisor (Production). We find that the first finding of non-maintenance of correct records is essentially based upon the second evidence of inflated ratio of scrap generation. As such, essentially there is only one basis on which the entire order of the Commissioner proceeds. The said basis is the statement of the Director and Supervisor (Production). Now it is to be seen as to how much evidentiary value, these statements carry as against evidences produced by the appellants so as to arrive at a finding of clandestine removal against the appellants. Before we proceed ahead, we would like to observe here that the charge of clandestine removal are serious allegations and there must be positive and tangible evidences on record to show that the assessee has been indulging into such activities. In the instant case, we find apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort the Revenue's stand of clandestine manufacture and removal of final product by the appellants. We also find that the appellants plea that in the absence of any norms fixed by the Department under Rule 173E of the Central Excise Rules, the quantity of the final product calculated on the basis of scrap generation cannot be made the basis for clandestine removal of the final product. In this connection, Dr. Chakraborty has relied upon the Tribunal's decision in the case of Saraya Steel Ltd. v. Collector of Central Excise, Allahabad [1998 (98) E.L.T. 787 (Tribunal) = 1997 (21) RLT 196 (CEGAT)]. In the said case also the allegations were based upon the recovery of metal percentage and generation of scrap. The Tribunal observerd that in the absence of any norms fixed for the appellants' factory and in view of the fact that recovery of metal shall be determined not only on the process of manufacture, efficiency of labour and the furnace but also on the quality of the raw material, the allegations of the excess production and clandestine removal were unsustainable. In the present case, we find that the entire case is based upon this input-output ratio. The admitted position in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The entire scrap generated in the factory is recycled and is again converted into final product. As such, there can be no motive for the appellants to show more generation of scrap. There is force in the appellant's contention that if percentage of scrap, which is recycled, is increased, corresponding input for subsequent charges gets increased and in turn, the production of final production is bound to increase. Apart from this, Modvat credit in proportionate quantity has to be foregone. Therefore, the alleged benefit by inflating percentage of scrap is totally offset and as such, no benefit is derived by them by showing more emergence of scrap. This is also the appellants' contention that the RG-I register of scrap and the finished products were verified and inspected from time to time by various Central Excise authorities including Audit and the Range Central Excise authorities and no discrepancy was found and the same were accepted to be correct. There is no allegations that the quantity of scrap recorded in daily production records, had not been used after recycling input material. It only goes to show the absence of evidence in favour of the Revenue and the demand being on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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