2008 (2) TMI 265 - AT - Central Excise

Allegation of Clandestine removal - no material placed by Revenue to show clandestine removal of inputs appellant submitted a chart of month-wise consumption of the inputs - appellant explained the natural loss, conversion loss & processing loss in detail which were not disputed - demand was calculated on basis of consumption figure supplied by appellant - since SCN issued is based on the data supplied by assessee, allegation of suppression is not sustainable - demand is barred by limitation

Issues:
1. Barred by limitation - Show cause notice timing
2. Excess utilization of duty paid raw materials
3. Adjudication and penalty imposition
4. Appeal against Commissioner (Appeals) decision
5. Clandestine removal of inputs allegation
6. Natural loss, conversion loss, and processing loss explanation
7. Modvat credit denial

Analysis:

1. Barred by Limitation - Show Cause Notice Timing:
The appellant argued that the show cause notice was time-barred as the demand was based on data they had provided earlier, with no intent to suppress facts. The Tribunal found that the demand was raised after scrutiny of records provided by the appellant, without any intent to evade duty payment. The Tribunal concluded that the demand was not sustainable on merit or limitation grounds, ultimately allowing the appeal with consequential relief.

2. Excess Utilization of Duty Paid Raw Materials:
The case involved allegations of excess utilization of duty paid raw materials, specifically Raw Petroleum Coke (RPC). The appellant contended that the data provided was for a specific period and not applicable to the entire year. The Tribunal noted that the demand for duty was calculated based on consumption figures supplied by the appellant for a limited period. The appellant provided a detailed chart of month-wise consumption, explaining natural loss, conversion loss, and processing loss, which were not disputed by lower authorities. The Tribunal found no evidence of clandestine removal of inputs and ruled that the demand of duty was unsustainable.

3. Adjudication and Penalty Imposition:
The adjudicating authority disallowed the credit on alleged excess utilization of raw materials and imposed a penalty, a decision upheld by the Commissioner (Appeals). However, the Tribunal, after hearing both sides and examining the records, found that the demand of duty was not sustainable due to various factors, including the appellant's detailed explanations and lack of evidence supporting the allegations.

4. Appeal Against Commissioner (Appeals) Decision:
The appellant appealed against the Commissioner (Appeals) decision, arguing that the demand was barred by limitation and challenging the findings regarding excess utilization of raw materials. The Tribunal, after considering the arguments and evidence presented, allowed the appeal and provided consequential relief to the appellant.

5. Clandestine Removal of Inputs Allegation:
The Departmental Representative reiterated the findings of the Commissioner (Appeals) regarding the alleged excess utilization of inputs. However, the Tribunal found that there was no material supporting the claim of clandestine removal of inputs by the appellant, as the explanations provided by the appellant were detailed and not disputed by lower authorities.

6. Natural Loss, Conversion Loss, and Processing Loss Explanation:
The appellant explained natural loss, conversion loss, and processing loss in detail, providing a month-wise consumption chart of inputs. The Tribunal found the explanations to be valid and not disputed by the Revenue. This detailed explanation played a crucial role in the Tribunal's decision to rule in favor of the appellant.

7. Modvat Credit Denial:
The Tribunal referred to a Larger Bench decision regarding Modvat credit denial based on loss of moisture in inputs due to evaporation. The Tribunal found that the appellant's explanations regarding losses were valid and in line with the legal principles established by previous decisions, ultimately leading to the conclusion that the denial of Modvat credit was unwarranted.

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