TaxTMI 
TaxTMI 
2016 (3) TMI 1048
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.... 01.4.2001 to 31.3.2003 1.4.1.4.1999 to 31.3.2003 Tax demanded in Order-in-Appeal Rs.3,52,838/- Rs.8,13,651/- (as computed by Department after issue of Order-in-Appeal) Extended period invoked Yes Yes Extended period Upto 31.12.2003 Upto 31.8.2003 Notional shortage of Sulphuric acid due to weighment difference Nil 208.406 MTs. Notional shortage of Phosphoric acid due to weighment difference 153.827 MTs. 351.062 MTs. 2. The appellants represented by learned advocate Mr. Sandeep Gopalakrishnan inter alia submits as follows: (i) They are one of the Government of India Public Sector Undertaking mainly engaged in the manufacture of fertilizers. (ii) Fertilizers manufactured were not dutiable during the period of dispute. (iii) They procured sulphuric acid and phosphoric acid from M/s. Sterlite Industries (SIIL), Tuticorin (distance is 340 Kms). These inputs are procured at zero rate of duty by availing the benefit of Chapter X Procedure of the erstwhile Central Excise Rules, 1944 and Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Go....
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....se Rules, 1944 provide for admitting goods lost or destroyed by natural causes or by unavoidable accidents, subject to the satisfaction of the proper officer. The following case laws are relied on in this regard. i. 1996 (86) ELT 6 (All.) UP State Cement Corporation Ltd. vs. Union, approved by Supreme Court in 1999 (112) E.L.T. A44 (SC). The High Court held that shortage (loss) of clinker during transit of cement clinker (transported to Churk plant located at a distance of 128 kms) is to be regarded as due to natural cause; hence demand under Rule 196 of Central Excise Rules, 1944 was not sustainable. ii. 2000 (126) E.L.T. 1072 (Tri.) National Organic Chemicals Indus Ltd. vs. CC (Import), approved by Supreme Court in 2002 (142) E.L.T. A 280 (SC). The Tribunal held that importer/actual user cannot be called upon to pay duty on the quantity of difference of about 1% between quantity of raw naphtha as per discharge certificate from the ship and the quantity as per the consumption certificate issued by Central Excise; the substance being volatile carried for distance of about 50 kms and there being no allegation of any unauthorized diversion. (h) ....
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....wad Mali Sugar Factory Ltd. vs. CCE, Pune: 2013-TIOL-898-HC-MUM-ST iii. M/s. Smart Finance vs. Jaipur: 2014-TIOL-1555-CESTAT-DEL. 3. The learned AR, Shri N. Jagadish appearing for the Revenue reiterated the findings given in the Order-in-Appeal passed by Commissioner (Appeals) saying that the appellants are accountable for the transit loss and are liable to pay duty on the same. i. The learned AR for the Revenue has also mentioned that in case of Appeal No.634, the loss of 153.827 MTs accounted towards the difference in weighments at two weighbridges is to the extent of 0.71% of the total quantity procured by the appellants. He submitted that Clause (4) of the specimen purchase order mentioned in Commissioner (A)s order reveal that appellants could recover the shortage in excess of 0.5% but the appellants did not do so. The appellants thus did not account for the difference and as per Rule 6 of Central Excise (RGCRDMEG) Rules, 2001, they are liable to pay the duty on the same. ii. In case of Appeal No.635/2006, Revenue has further argued that FACT procured sulphuric acid from Sterlite Industries, Tuticorin without payment of duty under Chapter X Proce....
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....t inputs in Central Excise Returns/Registers and would not have maintained parallel account. 4. In case of both these appeals, the facts on record and the submissions of both the sides have been carefully considered. 4.1 These two appeals numbering No. 634 and 635/2006 have been preferred against the Commissioner (A)'s Orders-in-Appeal No.165/2006 dated 10.3.2006 and 249/2006 dated 29.3.2006 respectively. 4.2 In case of appeal No.634/2006 vide Order-in-Original No.6/2005 dated 21.2.2005, Addl. Commissioner confirmed the demand of Rs. 8,59,103/- along with interest and imposed equivalent penalty under Section 11AC of the Central Excise Act, 1944 on the appellants. Against this order, the appellants had filed appeal before Commissioner (A). In the Order-in-Appeal No.165/2006 dated 10.3.2006, Commissioner (A) held that appellants were liable to pay the duty of Rs. 3,52,838/- on 153.827 MTs of phosphoric acid along with interest but the penalty imposed by Order-in-Original was set aside by the Commissioner (A). The Department fixed the duty liability of Rs. 3,52,838/- for said 153.827 MTs of phosphoric acid held liable to duty by Commissioner (Appeals). 4.3 In case of appea....
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....ellants mainly argue that in their case, it was not an actual shortage but notional shortage because of weighment difference and they say that seals of their tankers were always verified as intact saying further that, therefore, quantity sent from the supplier SIIL was received without any loss and that the Department did not show any physical loss of the goods. On the other hand, Revenue contends that the appellants regularly filed D-3 intimations and other returns which were duly submitted to Central Excise Officers where they never mentioned any notional shortage of the goods. But when the appellants commercial accounts were audited, it was noticed that their commercial accounts indicated a different picture indicating that they had been receiving less quantity of the goods (as pointed out by the Department) on which there has been statements also from the company persons, and the appellants have been making payments for less quantity of goods i.e., after taking into account of said notional shortage of goods to the supplier viz., M/s. Sterlite Industries (SIIL). Thus, the appellants have been paying to the suppliers for the less quantity of the goods, the receipt of which were....
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....eby holding that appellants were liable for payment of duty in case of appeal No.634/2006 for 153.826 MTs of phosphoric acid and for appeal No.635/2006 for the duty demand of 208.406 MTs of sulphuric acid and 351.06 MTs of phosphoric acid which were held as short accounted and not used for manufacture of fertilizer. 7.1 From both the impugned orders passed by the Commissioner (A), we find that in both the cases mandatory penalty for the cases where there was allegation of willful misstatement or suppression of facts with intent to evade payment of duty imposed under Section 11AC were set aside. In other words, ingredients or elements holding the appellants liable for willful default in payment of duty with the intention to evade, to cover their case under the provisions of willful misstatement or suppression of facts with intent to evade payment of duty, which are part of proviso to Section 11A(1) of Central Excise Act as well as under the provisions of Section 11AC of Central Excise Act, have not been found to be existing on record by the Commissioner (Appeals). Though under both the appeals, the duty has been demanded for the period beyond one year, in case of appeal No.63....
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....ion of penalty under Section 78 as well initiation of proceedings by invoking the extended period of limitation. Revenue has not preferred any appeal against the order of the primary authority against dropping of penalty under Section 77 of the Act. 7 In the facts and circumstances adverted to above, the impugned order of learned appellate Commissioner is unsustainable and is quashed. Appeal is allowed with no order as the costs." 7.2 Further from the facts on record and the findings given by Commissioner (Appeals), the Revenue has failed to prove the mala fides of the appellants to state that they had willfully suppressed the facts with intent to evade payment of duty of Central Excise. It is also a point that the appellants are a Public Sector (Government of India) Enterprise; and whose employees normally would not deliberately and willfully like to contravene the laws with the intention to evade the payment of good revenue as there cannot be any personal profit motive for them unless otherwise proved on record by the Revenue authorities, which they have failed to do. Rather the employees of PSU very well know that if there has been any contravention of laws/rules, kn....