COMMISSIONER OF CENTRAL EXCISE Vs. NACHIKETA PAPER LIMITED

JUDGEMENT

(1.) THE Revenue has filed the instant appeal under Section 35G of the Central Excise Act, 1944 (for brevity, 'the Act '), challenging order dated 5.2.2007, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity, 'the Tribunal '), claiming that a substantial question of law would arise for determination of this Court. The Tribunal has held that the Revenue has failed to produce any evidence of clandestine removal and sale of goods. It has further been found as a fact that the demand of duty on raw material found short is based on the presumption that the raw material must have been used in manufacturing final products, which was ultimately cleared without payment of duty. The Tribunal has noticed the undisputed fact that demand of duty on raw material is based on the quantification of the production, which is worked out on the basis of input and output ratio and in any case, the assessee -respondent had paid duty on the shortage immediately after the ascertainment.

(2.) BRIEF facts of the case are that the assessee -respondent is a company engaged in the manufacture of writing, printing and newsprint paper. It was using waste paper as their main raw material for the manufacture of their final products. Acting on the report of an intelligence report, the appellants visited the factory premises of the assessee -respondent on 18.2.2003. On preliminary enquiry, it was observed that the unit had been availing the benefits of exemption notification No. 6/2002 -CE dated 1.3.2002 at nil rate of Central Excise duty @ 16% Adv. w.e.f. October, 2002. The assessee -respondent had also been availing the exemption on newsprint manufactured by them. The visiting officers also conducted physical verification of the stocks of finished goods and raw material lying in the factory in the presence of Shri Vijay Mittal, Director of the Company. On verification, the stock of writing and printing paper (sheets) was found 13.565 MT as against the recorded balance of 17.470 MT resulting into shortage of 3.905 MT valued at Rs. 76,148/ - involving Central Excise duty of Rs. 12,184/ -. Likewise raw material stocks were also verified and there was shortage of 127.794 MT in the stock of waste paper. When the Visiting Officers enquired about these shortages, Shri Vijay Mittal, Director of the firm in his statement dated 18.2.2003 stated that he was not in a position to explain about the shortages as he was ill and was not regularly attending the factory. He further stated that in his absence some employees of his unit might have indulged in removal of finished goods without accounting for the same in the records, without payment of duty and without counting of raw material used in the manufacture of such finished goods. On further inquiry, Shri Vijay Mittal failed to reply as to whom these goods had been sold. Shri Vijay Mittal, however, admitted the fact of manufacture of 89.635 MT of paper board, based on the percentage of yield obtained in last three months, which arrived at 70.14% out of 127.794 MT of waste paper that was found short. He also undertook to deposit the Central Excise duty of Rs. 1,53,598/ - and Cess amounting to Rs. 1,200/ - on 89.635 MT in respect of paper Board valued at Rs. 9,59,988/ - and total duty of Rs. 2,03,006/ - and Cess amounting to Rs. 1491/ - on the shortage of finished goods. Accordingly the assessee deposited duty amount of Rs. 2,04,498/ - on 10.4.2003. After going through the records, the Adjudicating Authority confirmed the demand of Rs. 2,04,497/ - alongwith interest and imposed equal penalty.

(3.) THE assessee -respondent approached the Tribunal and vide order dated 2.3.2005, the Tribunal set aside the penalty imposed under Section 11AC of the Act and allowed the appeal filed by the assessee -respondent. The order of the Tribunal was challenged before this Court in CEA No. 135 of 2005. This Court vide order dated 25.9.2006 set aside the order of the Tribunal and remanded the matter back to the Tribunal for fresh decision in accordance with law. The observations made by this Court are as under: