Customs, Excise and Gold Tribunal - Mumbai
Western Metal Caps Ltd. (Known As Prayas ... vs Commissioner Of Central Excise on 7 April, 2004
Equivalent citations: 2004(170)ELT451(TRI-MUMBAI)
ORDER Archana Wadhwa, Member (J)
1. All the three appeals are being disposed of by a common order as the issue involved is identical. The appellant M/s Western Metal Caps. Ltd. is engaged in the manufacturing of alloy steel castings and stainless steel castings falling under Chapter heading 7325 & 7325.30 of Central Excise Tariff Act, 1985. As a result of audit objection, notices were issued against the appellants alleging that the processing loss of 27.68%, 23.06% and 22.25% shown in their balance sheet for the years 95-96, 96-97 and 97-98 were much on the higher side and as such it was alleged that the appellant had removed steel casting in the guise of processing loss without discharging Central Excise duties. On the identical ground Show Cause Notices in the 2nd appeal were raised.
2. Shri. K.A. Sindhi, Ld. Consultant and Shri. Hitesh Shah, ld. JDR appeared for the Revenue. The appellant's main contention is that the processing loss mentioned by them in their balance sheet is correct inasmuch as such processing loss usually arises upto 30%. The process of melting itself results in a loss of 8 to 20% whereas other process like slag off, pouring, grinding, cutting, heat treatment and gauging involve processing loss from 1 to 4%. They have also very strongly contended that there is no evidence of clandestine removal and as such the charge of having removed the goods without payment of duty under the guise of loss cannot be upheld against them. Shri. K.A. Sindhi also placed on record, an assessment order passed by the Income Tax authority in denovo proceedings and holding in favour of the appellants. In the said proceeding the attention of IT authorities has been drawn to emergence of loss in similarly situate units where percentage of loss has been to the extent of 50 to 55%. Reference in that case has also been made to the Indian Foundary Journal estimating the loss to the tune of 28% as also to certificate of an expert Shri R.S. Kothari, stating that out of 100 tons of raw material consumed 60 to 70 tons will be burning loss while the remainder will be in the form of slag and skull, scales in heat treatment and dust due to cutting, grinding, finishing in fetling, which is total wastage and cannot be reused for manufacture of casting.
3. Shri. K.A. Sindhi has also submitted that the Commissioner has relied upon the Ministry's letter allowing processing loss to much lower percentage but submits that these guidelines are not applicable as they were in respect of integrated steel plants.
4. The appellant has also attacked demand on the point of limitation by submitting that the removal was being reflected in the Central Excise statutory records and as such the Revenue is not justified in issuing the Show Cause Notice by invoking the longer period of limitation.
5. Countering arguments Shri Hitesh Shah, Ld. SDR submits that higher percentage of loss as shown by the appellant is suggestive of the fact that the final product is being removed by them without payment of duty inasmuch as in respect of hard metal like steel, such higher invisible losses cannot be expected. For the above proposition he has relied on the decision in the case of Greysham & Co. Vs. CCE-2000 (117) ELT 350 (Tri.).
6. Considered the submission made by both the sides. The demand has been made against the appellant on the sole ground that higher percentage of invisible loss has been shown by them in the balance sheet. The appellant has tried to explain that such loss occurs at various stages of slag off, pouring, grinding, cutting, heat treatment and gauging as also the main loss occurs on the point of melting. We find that no verification has been conducted by the Central Excise officers so as to adjudge the appellants claim of loss of higher percentage. We also note that the appellants placed before us an order by the Income Tax authorities, showing the percentage losses of similarly situated units, which is higher than the one claimed by the appellant in the present case. Apart from that there is no other material or evidence on record to show that the appellant have been in fact manufacturing steel castings clandestinely and removing the same without payment of duty. It is well settled law that the onus to prove the clandestine clearance lies heavily upon the revenue and it is required to be discharged by production of sufficient, tangible and affirmative evidence. In the instant case there is nothing on the record. Mere claiming of higher invisible processing loss may lead to some doubt against the appellant but cannot take the place of legal evidence so as to inevitably conclude that the casting have been manufactured under the guise of processing loss. We also observe that case laws relied upon by the DR is not applicable to the facts of this case inasmuch as in that case disputed issue was of waste and scrap originated at the job workers premises and it was specifically observed in the case that the appellants have not given any estimation of invisible loss.
7. Our attention has been drawn to the Tribunal's decision in the case of Premier Packaging vs. Collector-1986 (26) ELT 333 (Tri.), wherein it was held that shortage of raw material cannot lead to evidence of clandestine manufacture and surreptitious removal of goods. Inasmuch as in the instant case there is no positive evidence reflecting upon clandestine removal by the applicant, we are of the view that the impugned orders cannot be sustained. We set aside the same and allow all the appeals with consequential relief, if any, to the appellants.