Duty on excess wastage in job work upheld, but extended limitation and penalty failed without evidence of suppression.

Duty was held payable on aluminium ingots attributable to wastage exceeding the prescribed 6% norm during job work, because the excess wastage was treated as use beyond the scope of the duty-free permission, even though the entire quantity of ingots was otherwise utilised and no diversion was shown. However, in the absence of evidence of diversion or suppression, invocation of the extended period of limitation was not justified and penalty was unsustainable. The duty demand was therefore sustained only for the valid period, while the time-barred demands were remanded for restriction to the normal period and the penalty was set aside.

---

---

Issues: (i) Whether duty was payable on aluminium ingots corresponding to wastage generated in excess of the prescribed 6% norm during job work; (ii) Whether the extended period of limitation and penalty were sustainable in the absence of evidence of diversion or suppression.

Issue (i): Whether duty was payable on aluminium ingots corresponding to wastage generated in excess of the prescribed 6% norm during job work.

Analysis: The inputs were imported and sent for conversion into castings under Notification No. 52/2003-Cus. and the Foreign Trade Policy. The record showed that the entire quantity of ingots was utilised in production and there was no evidence of diversion. However, the wastage consistently exceeded the norm fixed by the Development Commissioner, and the quantity consumed in excess wastage was treated as utilisation beyond the scope of the permission for duty-free procurement.

Conclusion: Duty on the quantity relatable to excess wastage was payable, and the demand was upheld for the periods not affected by limitation.

Issue (ii): Whether the extended period of limitation and penalty were sustainable in the absence of evidence of diversion or suppression.

Analysis: The Revenue did not adduce evidence of diversion of inputs or suppression of material facts. In the absence of such evidence, invocation of the extended period was not justified for the notices where limitation was in issue, and penalty was unwarranted.

Conclusion: The extended period was not sustainable, the time-barred demands were remanded for restriction to the normal period, and the penalty was set aside.

Final Conclusion: The duty demand was sustained only to the extent attributable to excess wastage within the valid period, while the demands requiring limitation scrutiny were sent back for recomputation and the penalties were annulled.

Ratio Decidendi: Where duty-free inputs are consumed in excess of notified wastage norms, duty can be demanded on the excess quantity, but in the absence of evidence of diversion or suppression the extended period of limitation and penalty cannot be sustained.

---