2006 (12) TMI 150 - HC - Central Excise

Tribunal's Conclusion Overturned; Court Demands Evidence for Excise Duty Charges, Remands Case for Reconsideration.

JK. CORPORATION LTD. Versus COMMISSIONER OF C. EX. & CUS., BHUBANESWAR

JK. CORPORATION LTD. Versus COMMISSIONER OF C. EX. & CUS., BHUBANESWAR - 2007 (210) E.L.T. 501 (Ori.) Issues Involved:1. Whether the Tribunal's conclusion about the discrepancy in the Assessee Company's records is based on evidence and materials on record.2. Whether the Tribunal correctly upheld the finding of clandestine removal of input materials without payment of Central Excise duty.3. Whether the Tribunal erred in law by prioritizing the private records over statutory records.4. Whether the penalty imposed under Rule 173Q of the Central Excise Rules was justified.Issue-wise Detailed Analysis:1. Tribunal's Conclusion on Record Discrepancy:The Tribunal concluded that the Assessee Company had not satisfactorily explained the difference in quantities between the statutory records under the Central Excise Act and the private records maintained in terms of ISO 9002. The Company argued that the Member (Technical) correctly found the variance negligible and permissible, while the Member (Judicial) erroneously ignored the Company's explanation. The Court found substance in the Company's contention that the specific explanations regarding the discrepancies were not considered by the Tribunal, thus rendering the Tribunal's conclusion unsustainable.2. Tribunal's Finding on Clandestine Removal:The Tribunal upheld the Commissioner's finding that the Company clandestinely removed input materials without paying Central Excise duty. The Company provided detailed explanations for the discrepancies in MEG, PP Chips, and PTA consumption, arguing that the differences were minimal and within permissible limits. The Court noted that the Tribunal failed to consider these explanations and relied solely on assumptions. Citing precedents like Union of India v. Indian Aluminum Co. Ltd. and Oudh Sugar Mills Ltd. v. Union of India, the Court emphasized that charges of clandestine removal must be based on concrete evidence, not assumptions.3. Tribunal's Preference for Private Records:The Tribunal concluded that the private records maintained under ISO 9002 should be taken into account over statutory records. The Company contested this, arguing that the Member (Technical) correctly considered the explanations and found the differences negligible. The Court found that the Tribunal misdirected itself by not considering the explanations provided by the Company, thus making the finding unsustainable.4. Penalty Under Rule 173Q:The Tribunal upheld the penalty imposed under Rule 173Q of the Central Excise Rules. The Company argued that neither the show cause notice nor the Commissioner's order specified which clause of Rule 173Q was violated. Citing Amrit Foods v. Commissioner of Central Excise, the Court held that the exact nature of the contravention must be specified for a penalty to be imposed. The Court found that the penalty orders were vitiated due to the lack of specific particulars of contravention.Additional Points on Penalty:The Court also addressed the penalty imposed under Section 11AC of the Central Excise Act, 1944, noting that the provision came into effect after the period in question. Citing Commissioner of Central Excise, Coimbatore v. Elgi Equipments Ltd., the Court held that Section 11AC is prospective and cannot apply to acts committed before its insertion.Conclusion and Remand:The Court concluded that the Tribunal misdirected itself in law by not considering the explanations provided by the Company. The Court answered the first question in the affirmative and the second in the negative, both in favor of the Company. The remaining questions were deemed unnecessary to answer. The case was remanded to the Tribunal for reconsideration, directing that the exercise be completed within six months.Disposition:All three reference cases were answered and disposed of accordingly, with no order as to costs.