Year-wise scrutiny of wastage norms required before customs duty can be confirmed on alleged excess scrap

Customs duty liability on alleged excess waste and scrap must be tested through a year-wise examination of imported inputs, issues for manufacture, actual wastage, and the applicable Standard Input Output Norms over the entire relevant period. A sketchy review focused on only one financial year is insufficient where the dispute spans several years, and a speaking order must explain the factual basis for any demand. The document also notes that limitation cannot be invoked to defeat recovery where fraud or fraudulent suppression is alleged. The duty demand and penalty were not finally sustained; the matter was remitted for fresh adjudication on admissibility of wastage and related liability.

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Issues: Whether the demand of customs duty on alleged excess waste and scrap generated beyond the permissible limit could be sustained without year-wise examination of imports, issues and wastage, and whether the plea of limitation could be rejected in the facts of the case.

Analysis: The Tribunal found that the adjudicating authority had not examined the quantity of imported inputs, their issue for manufacture, the waste and scrap generated, and the permissible wastage on a year-wise basis for the entire relevant period. The finding had been reached on a sketchy and incomplete appraisal focused essentially on one financial year, although the dispute covered several years. The Tribunal also noted that where fraud is alleged against Revenue, limitation cannot be pleaded to defeat recovery, as fraud nullifies solemn acts. At the same time, the impugned order was found to be inadequately reasoned because it did not contain a proper year-wise analysis necessary to decide whether the wastage remained within the prescribed Standard Input Output Norms.

Conclusion: The duty demand and related penalty were not finally affirmed; the matter was remitted for fresh adjudication after year-wise examination and a speaking order.

Final Conclusion: The appeal succeeded to the extent of remand, with the adjudication reopened for a fresh factual determination on admissibility of wastage and related duty liability.

Ratio Decidendi: Where liability depends upon wastage within prescribed norms over multiple years, a reasoned year-wise examination is essential before confirming duty, and limitation cannot be used to shield fraudulent suppression.

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