Central excise duty demands of Rs.85 lakh partially allowed, penalties under Section 11AC and Rule 26 set aside

CESTAT Kolkata partially allowed the appeal against central excise duty demands totaling Rs.85,74,214. The tribunal set aside duty demand of Rs.61,24,002 for alleged clandestine clearance due to lack of evidence. It reduced duty demand of Rs.22,99,672 to Rs.3,02,176 based on reconciled stock shortage of 36.13 MT. Duty demand of Rs.1,50,540 for under-valuation was upheld as undisputed. All penalties under Section 11AC and Rule 26 were set aside, finding no evidence of intentional duty evasion or clandestine clearance.

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Issues Involved:

1. Demand of Rs. 61,24,002/- for resin powder allegedly manufactured by the Appellant.
2. Demand of Rs. 22,32,691/- for alleged clandestine clearance of resin powder.
3. Demand of Rs. 1,50,540/- for under-valuation of stock transferred goods.
4. Imposition of penalty on the Appellant and Appellant No. 2.

Summary:

Issue No. (i): Demand of Rs. 61,24,002/-

The Appellant contended that the Commissioner erred in confirming the duty demand of Rs. 61,24,002/- for resin powder manufactured by Allied Resins using the Appellant's facilities, as Allied Resins had already paid the duty on this quantity. The Tribunal observed that there was no evidence to substantiate the allegation of clandestine clearance and held that the demand of duty from the Appellant on this quantity is not sustainable. Consequently, the demand was set aside.

Issue No. (ii): Demand of Rs. 22,32,691/-

The Tribunal noted that the allegation of clandestine removal of 349023 kg of resin powder was based solely on the statements of A. K. Bhora and Asim Kumar Das, without any corroborative evidence. The Appellant argued that the resin powder yield was 45% of the liquid resin consumed, but even if it was 55%, the variation was minor. The Tribunal accepted the Appellant's reconciliation statement showing a net shortage of 36.13 MT and held the Appellant liable to pay duty of Rs. 3,02,176/- along with interest for this shortage.

Issue No. (iii): Demand of Rs. 1,50,540/-

The Appellant did not dispute the liability for the confirmed demand of Rs. 1,50,540/- relating to under-valuation of stock transferred goods. The Tribunal upheld this demand.

Penalties:

The Tribunal observed that there was no evidence to establish clandestine clearance of the resin powder or the role of Appellant No. 2 in any alleged offense. Therefore, the penalties imposed on both Appellant 1 and Appellant 2 were set aside.

Conclusion:

1. The demand of Rs. 61,24,002/- was set aside.
2. The demand of Rs. 22,32,691/- was reduced to Rs. 3,02,176/- for the shortage of 36.13 MT, payable with interest.
3. The demand of Rs. 1,50,540/- was upheld.
4. Penalties imposed on Appellant 1 and Appellant 2 were set aside.

The impugned order was modified accordingly, and the appeals were disposed of on these terms.

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