2013 (5) TMI 343 - AT - Central Excise

Fabric manufacturer wins appeal against duty demand due to lack of evidence, penalty imposition rejected post-reversal.

The Tribunal set aside the duty demand of Rs.3,00,020/- against a fabric manufacturing business due to lack of evidence linking shortages to ... Inspection - Non-maintenance of record - shortage of goods – Demand of duty - Discharge of duty by appellant under compounded levy scheme – rejected - Held that :- The question required to be decided in the present appeal is as to whether the non-maintenance of record by the appellant during the intervening period of filing the application and rejection of the same by the Commissioner, which resulted in shortages of grey fabrics and final product would call for confirmation of duty of Rs.300,020/-. As per the appellant during the said period, they discharged their duty liability under compounded levy scheme, which does not take into consideration. There is nothing on record to show that the goods found short were not included in the goods cleared under compounded levy scheme, on which the duty already stand discharged. It is not the Revenue’s case that such shortages were not part and parcel of the clearances effected under compounded levy scheme on which duty already stand paid by the appellants. Thus, no justification in separate confirmation of demand of Rs.3,00,020/-. Accordingly, we set aside the impugned order. Issues:Confirmation of demand of duty based on non-maintenance of records during a specific period and rejection of application for compounded levy scheme.Analysis:The judgment involves two appeals, one by the appellant and the other by the Revenue, arising from the same impugned order confirming a duty demand of Rs.3,00,020/- but setting aside the penalty. The appellants are in the business of manufacturing processed man-made fabrics. During a visit to their factory, a shortage of grey fabrics and processed man-made fabrics was detected. The appellant had applied for permission to work under a compounded levy scheme, which was rejected later. The duty liability was confirmed, and subsequent appeals were also rejected.The main issue is whether the non-maintenance of records by the appellant during the period between applying for the compounded levy scheme and its rejection justifies the confirmation of duty demand. The appellant argued that they were operating under the compounded levy scheme during the relevant period, where duty was paid on a lump sum basis. There was no evidence to suggest that the goods found short were not part of the clearances under the scheme. The Tribunal found no justification to confirm the demand based on the lack of records during that period. Therefore, the impugned order was set aside, and the appeal by the assessee was allowed.Since the duty confirmation was set aside, the Revenue's appeal for imposing a penalty became irrelevant and was rejected. Both appeals were disposed of accordingly, with the appellant's appeal being allowed due to the lack of justification for confirming the duty demand based on the non-maintenance of records during the disputed period.