Accounting for excisable broken pieces upheld duty demand, while penalty was reduced for proportionality.

Private records showing exact production measurements supported a differential central excise duty demand on marble slabs and broken pieces, because the assessee had not maintained separate breakage records and the plea that the difference represented only broken pieces was rejected. The broken pieces were treated as excisable goods, although they were eligible for exemption under Notification No. 16/90-C.E.; goods classifiable under sub-heading 2504.90 still had to be properly accounted for in statutory records. The duty demand was upheld, while the penalty was reduced on the ground that the original quantum was excessive in the circumstances, granting partial relief to the assessee.

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Issues: (i) Whether the demand of differential Central Excise duty on marble slabs and broken pieces was sustainable. (ii) Whether the penalty imposed required reduction.

Issue (i): Whether the demand of differential Central Excise duty on marble slabs and broken pieces was sustainable.

Analysis: The private records recovered from the premises showed exact measurements of production, and the assessee had not maintained any separate record of breakage. The plea that the difference represented broken pieces was not accepted. The broken pieces were held to be excisable goods, though they were eligible for exemption under Notification No. 16/90-C.E. dated 20-3-1990. Goods classifiable under sub-heading 2504.90 were therefore required to be accounted for in the records, and the private records supported the demand of duty.

Conclusion: The demand of differential duty was upheld against the assessee.

Issue (ii): Whether the penalty imposed required reduction.

Analysis: On the facts and circumstances, the amount of penalty originally imposed was considered excessive in relation to the matter in dispute. The adjudicatory authority's view was interfered with only to the extent of the quantum of penalty.

Conclusion: The penalty was reduced in favour of the assessee.

Final Conclusion: The duty demand was confirmed, while the penalty was scaled down to a lesser amount, resulting in only partial relief to the assessee.

Ratio Decidendi: Where goods are excisable but covered by an exemption notification, their production and breakage must still be properly accounted for in records, and unaccounted differential quantities can sustain a duty demand; penalty may be modified on assessment of proportionality.

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