2009 (5) TMI 666 - AT - Central Excise

Clandestine removal - excess stock of 854 kgs of laminated fabrics - Submissions of appellant not considered - principles of natural justice - Held that - As rightly pointed out by the appellant none of the submissions relating to Chartered Engineer certificate standards prescribed by BIS letter issued by IPCL has been considered - also other than the formula and excess stock which was found there is no other evidence available. It is well established that for demanding duty on clandestine removal something more than mere admission is required and in this case other than the admission statements of proprietor and the laminator no other evidence is forthcoming and proprietor had also admitted that formula was correct but he had not accepted any clandestine removal. In view of the above demands confirmed against the appellants in respect of other items other than seized goods and HDPE tapes that could have been used for the manufacture of seized goods has to be set aside - quantum of penalty also reduced. Appeal allowed in part.

Summary

Issues:
1. Central Excise duty on manufacturing of HDPE/PP Tapes, fabrics, and woven sacks.
2. Exemption under Notification No. 63/87 for laminating unlaminated fabrics.
3. Confiscation of excess stock of laminated fabrics and duty demands.

Issue 1: Central Excise duty on manufacturing of HDPE/PP Tapes, fabrics, and woven sacks:
The appellant, engaged in manufacturing HDPE/PP Tapes, fabrics, and woven sacks, submitted that unlaminated fabric was exempt from Central Excise duty, while laminated fabrics attracted duty as per the Central Excise Tariff Act. The appellant sent unlaminated fabrics to laminators for lamination, following Chapter X procedure, and received laminated fabrics back for further processing into HDPE woven sacks. The appellant's factory was visited, excess stock of laminated fabrics was seized, and investigations led to a confiscation order, duty demands, and penalties.

Issue 2: Exemption under Notification No. 63/87 for laminating unlaminated fabrics:
The appellant contended that the Revenue's case was based on a theoretical formula without concrete evidence of clandestine removal. The appellant provided a certificate from a Chartered Engineer, standards from the Bureau of Indian Standards (BIS), and a letter from the Indian Petroleum Commission Limited (IPCL) to support variations in the lamination process. The appellant argued that the demands were based on theoretical calculations, and officers admitted relying solely on the formula without considering technical factors. The Tribunal noted that the Commissioner did not consider the submissions regarding the certificates and standards, emphasizing the lack of evidence beyond the theoretical formula and excess stock.

Issue 3: Confiscation of excess stock of laminated fabrics and duty demands:
The Tribunal observed that demands confirmed against the appellant, except for seized goods and HDPE tapes potentially used for the seized goods, lacked substantial evidence beyond admissions. It was highlighted that demanding duty for clandestine removal required more than mere admissions. The Tribunal set aside demands on products other than the seized goods and HDPE tapes. The Order in Original was confirmed for certain items, with a reduction in the penalty imposed on the appellant considering the total duty evaded and other circumstances.

In conclusion, the Tribunal upheld the Order in Original for specific items, while reducing the penalty imposed on the appellant. The judgment emphasized the necessity for concrete evidence in duty demands related to clandestine removal and highlighted the importance of considering technical factors beyond theoretical formulas in such cases.