Double taxation prohibition: duty paid on scrap bars a fresh duty demand on corresponding raw materials; penalty also quashed.

Where duty has been assessed and paid on scrap, a subsequent demand charging duty on the same raw materials alleged to have produced that scrap was held impermissible as amounting to double taxation absent evidence of diversion or concealment; the specific demand for duty on excess raw materials was therefore cancelled. Further, imposition of penalty for clearances of scrap in excess of SION norms was set aside where the exporter was a 100% EOU operating under departmental supervision and no contrary evidence of concealment or diversion existed. Other confirmed demands on scrap that were not disputed remain unaffected.

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Issues: (i) Whether demand of duty on raw materials consumed in excess of SION norms is sustainable where duty has already been demanded and paid on scrap generated from those raw materials; (ii) Whether imposition of penalty for clearances of scrap in excess of SION norms is sustainable where the appellant is a 100% EOU operating under departmental supervision.

Issue (i): Whether the Department can demand duty on raw materials consumed in excess of SION norms in addition to duty already demanded and paid on scrap generated from those raw materials.

Analysis: The assessment record shows demand and payment of duty on clearances of excess scrap. No evidence was produced to demonstrate diversion of excess raw materials. Demanding duty again on the quantity of raw materials alleged to have gone into generation of excess scrap results in charging duty twice for the same physical quantity which produced scrap already charged.

Conclusion: Demand of Rs.4,55,365/- being duty on raw materials consumed in excess of SION norms is set aside. This conclusion is in favour of the assessee.

Issue (ii): Whether the penalty imposed for clearance of scrap in excess of SION norms is sustainable against a 100% EOU under departmental supervision.

Analysis: The appellant, a 100% EOU, had declared manufacturing processes and scrap generation to authorities and operated under direct supervision and control of departmental officers. In the absence of contrary evidence of concealment or diversion, imposition of penalty for excess scrap clearances is not warranted.

Conclusion: The penalty of Rs.7,02,695/- imposed on the appellant is set aside. This conclusion is in favour of the assessee.

Final Conclusion: The impugned order is modified by cancelling the demand of duty on excess raw materials and by setting aside the penalty; other confirmed demands on scrap which were not disputed remain unaffected, resulting in a partly favourable outcome for the assessee.

Ratio Decidendi: Where duty has been assessed and paid on scrap generated, a subsequent demand charging duty on the same raw materials alleged to have produced that scrap constitutes double taxation and is impermissible in the absence of evidence of diversion or concealment.

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