TMI Blog2004 (1) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants are engaged in manufacturing Quartz Movement for Clocks (QMCs), Table Clocks, Wall Clocks, etc. On 11-1-95 Officers of Directorate General of Anti-Evasion (DGAE) conducted search and seizure operations at various premises of Chawla Group of Companies and took over several documents under panchnama. Thereafter inquiries were conducted and statements were recorded from various persons. Show cause notice dated 4-2-98 was issued to the appellants alleging that the assessee had suppressed production and had clandestinely removed excisable goods by manipulating/fabricating the statutory records. It was alleged that on the day of search there was a shortage (and in certain cases excess) of goods in large number of products. It was also alleged that norms of wastage claimed in respect of manufacture of coils used in QMCs was inflated and the excess material was used for clandestine production and removal of finished goods. According to the show cause notice, only 2% wastage can be allowed and on that basis there is evasion of Central Excise duty to the extent of Rs. 4,78,37,028/- on account of coils manufactured and removed without accounting in the statutory records. Show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove case also the allegation was of excess claim of wastage of plastic used as raw material. 5.The assessee further submitted that its claim for wastage of raw material cannot be rejected on the basis of the statements obtained from SSIL and SPWPL. The percentage of wastage will vary not only on the basis of the machinery used but also on the skill of labour, erratic supply of electricity, the product design and the quality of the copper wire. The assessee pointed out that its unit was improving the methodology and for the period from 1-1-97 to 7-5-97 the wastage of copper wire came down to 5% which is physically verified by the department. According to the assessee, initially they were using longer bobbins which required 5000 turns thereby consuming more copper wire. By improving the technology and efficiency and experience a bobbin smaller in length and width was used subsequently resulting in lesser wastage. The assessee submitted that the entire waste of copper wire had been accounted. The sale realisation of the copper wire waste was also properly accounted. The sale was on cash and carry basis. As regards wastage of plastic the assessee submitted that there was wastage of 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Counsel for the appellant pointed out (he himself submitted that this contention was not raised before the Commissioner) that for the purpose of granting advance licence it is assumed that 10 gms, of wire would be required for one bobbin. Going by the above ratio, the appellant had cleared much more than the quantity which could be manufactured out of the total quantity of enamelled copper wire imported by it. The learned Counsel further contended that the cost of production of one QMC would roughly come to about Rs. 25/- and that all the raw materials are purchased by the assessee. He points out that most of such raw materials are imported including PCB which is the most expensive item costing Rs. 2.5. The department has not attempted correlation with the quantity of raw materials imported by the appellant during the relevant period. There was no attempt to correlate Modvat taken on other items. No investigation was conducted by the authority in this direction at all. The learned Counsel points out that if the allegation in the show cause notice regarding the number of items alleged to have been produced by the appellant is accepted, its value would come to Rs. 60 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the officers of the department from time to time without any objection. There is no allegation that any particular material fact was not disclosed or suppressed from the officers. It was open to the Assessing Officers to verify the records of consumption or wastage, if they had any doubt about the claim made by the appellant of wastage. 9.Learned DR brought to our notice remarks from postal authorities regarding the name and address of the authorities to whom the appellant had sold copper wire and who were treated as fictitious units. As against Manju Plastics, C-18, Naraina Gaon, New Delhi the remark is that there is no such no. as 18 Naraina Gaon. The communications addressed to the other buyers are either "Returned. No such firm is in that flat number" or "Incomplete address" or "wrong address" etc. On the basis of the remarks the learned DR would submit that the findings of the Commissioner that the buyers are fictitious persons, are to be accepted. He further submits that the statement of Shantlal of M/s. Shantlal Metal Stores would show that he has denied the dealings with the appellant. M/s. Shantlal Metal Stores is No. (2) in the list of buyers given by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that the said quantity viz. 2,18,833 kgs. of tread rubber was removed illicitly during the year 1981-82. The quantity was arrived at only from the shortfall of the sulphur. The assessee had explanation that the quantity of sulphur had damaged in rain and therefore, not used. The contention of the assessee was that under Rule 173E, the normal quantum of production has to be determined with reference to various factors and some of those factors were available with the department, but the same has not been adverted to or considered. If those factors have been adverted to it was the contention of the assessee that the quantum of production could not be what the Collector determined and the Appellate Tribunal confirmed ............... The rule requires adverting to several factors for determining the normal production such as installed capacity of the factory, labour employed, power consumed and other relevant factors apart from raw material utilisation. If inference has been drawn without adverting to relevant fact, the resulting order will be vitiated." 11.So also the authorities could have correlated the Modvat taken on certain other items by the assessee. Merely on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erts that he does not keep any account of his transactions. No reliance could be placed on the statement of a person who admits that he does not keep any record of his transaction. We, therefore, find that the Commissioner has wrongly taken the view that most of the buyers of the assessee were fictitious and therefore, no reliance could be placed on the records kept by the assessee regarding the quantum of waste/scrap sold. 13.We have gone through the certificate of Chartered Accountant produced by the assessee. We find that in this certificate there is no specific consideration of the wastage of copper wire. Wastage shown at 2% is in the entire manufacturing process. Therefore, this certificate cannot in any way support the Revenue's case. 14.We are also not accepting the view taken by the Commissioner that the appellant had exaggerated the generation of plastic waste, manipulating the sale price of 1st hand generated plastic scrap by keeping the prices low. The statement of Om Prakash Vig who is doing the job work would show that in his factory during the process of manufacturing finished cabinet of wall clock the wastage of plastic would be from 7 to 27%. He has also stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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