Production norm under excise rules must reflect all relevant factors; demand and equal penalty failed when fixed only on raw material consumption.

Under Rule 173E, a production norm cannot be fixed merely by reference to raw material consumption; it must be determined by considering all relevant factors governing normal production. The Tribunal applied its earlier ruling on identical facts and found that the duty demand rested on an inadequate basis because the norm was not lawfully worked out. As the foundation for the demand was defective, the confirmation of duty and equal penalty could not be sustained, and the appeals were allowed.

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Issues: Whether the duty demand and equal penalty could be sustained when the production norm was fixed only with reference to raw material consumption and without considering other relevant factors under the applicable excise rules.

Analysis: The appeals turned on whether the basis adopted for arriving at the production norm under Rule 173E was legally sufficient. The Tribunal followed its earlier decision on identical facts and held that the norm had to be determined with regard to the relevant factors governing normal production, and not merely on the basis of raw material. Since the demand rested on an inadequate foundation, the confirmation of duty and penalty could not stand.

Conclusion: The demand of duty and the penalty were not sustainable and the appeals were allowed.

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