2004 (10) TMI 455 - AT - Central Excise

Tribunal rules in favor of paper bag manufacturers in duty dispute

COMMISSIONER OF C. EX., PONDICHERRY Versus KC. PALANISAMY & CO.

The Tribunal upheld the decision to allow the appeal of the assessee, manufacturers of multi wall paper bags, in a case where the Revenue demanded duty ... Demand - Clandestine removal of waste from job workers premises Issues:1. Duty demand based on rough estimate without evidence.2. Absence of disclosure of waste in RT 12 return.3. Burden of proof on the assessee regarding waste sale by job worker.4. Lack of evidence from Revenue supporting waste sale.Issue 1: Duty demand based on rough estimate without evidenceThe appeal was filed by the Revenue against the Order-in-Appeal, where the Commissioner had allowed the appeal of the assessee, who were manufacturers of multi wall paper bags. The department alleged that no waste was returned from the job worker for the manufacture of Extensible Sack Craft Paper (ESKP), leading to a show cause notice being issued. The Assistant Commissioner confirmed a duty demand of Rs. 1,82,992 under Section 11A of the CE Act, 1944, based on a rough estimate without any evidence. However, the Commissioner (Appeals) set aside this order, stating that the original authority had done rough estimate and guesswork without any material. The Tribunal upheld this decision, noting the absence of evidence supporting the duty demand and the lack of a waste disclosure column in the RT 12 return. The Tribunal found the duty demand confirmation to be uncalled for, as the Revenue failed to provide any material or evidence to support their claim.Issue 2: Absence of disclosure of waste in RT 12 returnThe Tribunal observed that the original authority wrongly criticized the assessee for not disclosing waste in the RT 12 return, as there was no column for waste removal in the return. This absence of a waste disclosure column rendered the original authority's observation unfounded. The Tribunal emphasized that the burden of proof was on the Revenue to provide evidence of waste sale by the job worker, which they failed to do. The Tribunal found no merit in the Revenue's appeal, as they had not substantiated their claim with any material or evidence.Issue 3: Burden of proof on the assessee regarding waste sale by job workerDuring the proceedings, the original authority had asked the assessee to prove that their job worker had not sold any waste, placing the burden of proof on the assessee. However, the Tribunal noted that it was actually the Revenue's responsibility to provide evidence supporting their allegation that the job worker had sold waste. The Tribunal highlighted that the Revenue had failed to fulfill this obligation and attempted to confirm duty demand without any material. Ultimately, the Tribunal upheld the Commissioner's decision to allow the appeal of the assessee, as there was no evidence supporting the duty demand based on a rough estimate.Issue 4: Lack of evidence from Revenue supporting waste saleThe Tribunal thoroughly reviewed the case records and found that the lower appellate authority had passed a reasoned order, which correctly pointed out the lack of evidence supporting the duty demand. The Tribunal noted that the original authority had asked the assessee to prove a negative, which was not required, as the burden of proof lay with the Revenue to substantiate their claim. Since the Revenue failed to provide any evidence of waste sale by the job worker, the Tribunal deemed their appeal to be devoid of merits and rejected it accordingly.This detailed analysis of the judgment highlights the key issues involved in the case and the Tribunal's comprehensive reasoning behind upholding the decision to allow the appeal of the assessee and reject the Revenue's appeal.