PACIFIC GRANITES LTD Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) COMMISSIONER of Central Excise, Jaipur by Order -in -Original No. 10/1997, dated 30 -5 -1997 confirmed a duty demand for Rs. 1,09,04,145/ - against the appellants apart from imposing a penalty of Rs. 25 lakhs on them. This appeal is against the said order.

(2.) THE appellants are engaged in the manufacture of polished granite slabs (irregular form) and polished granite slabs cut to size as tiles. They are a 100% Export Oriented Undertaking (EOU). They export all the quantity of their product and do not sell in the local market. Appellants procure raw material viz. granite block, internally. The said granite blocks are first cut to slabs and then they are subjected to polishing. According to the appellants, breakages occur at the stage of polishing of slabs which may vary from a breakage in the corner of the slab to a breakage in the middle of the slab. Such broken slabs are not sold and are dumped in the factory premises itself, claim the appellants. For making tiles, irregular slabs are subjected to the process of cutting to the desired sizes and in the manufacture of tiles also wastages occur and these wastages are also dumped in the factory premises itself, according to the appellants. Officers of Central Excise visited the appellants' factory premises on 6 -10 -1994 and conducted stock verification. The Officers verified the stock of irregular polished granite slabs, polished granite tiles and unpolished granite slabs. RG 1 Registers for the said products were also verified. As a result, the Officers found a shortage of 7917.1598 sq. mts. of irregular polished granite slabs. A panchanama was also prepared. Statement of Vice President of the appellant Company Shri R.S. Mangal, was taken on 7 -10 -1994 in which he stated that the appellants had not conducted periodical stock taking of the products and the shortage found may be for the reason of cumulative effect of measurement errors and that some of the goods produced may have been lost as breakages during handling, etc. On the basis of the stock verification and the statement recorded from the Vice President, a Show Cause Notice dated 7 -6 -1998 was issued proposing to demand duty of over Rs. 1.9 crores on the quantity of 7917.1598 sq. mts. of slabs and proposing imposition of penalty. For purposes of valuing the goods allegedly found short, the price at which M/s. Coromandel Granites Limited, EOU had cleared such irregular granite slabs of 'black' and 'galaxy' varieties were taken as the basis. The price adopted was Rs. 1721.60 per sq. mt. which was the price of 'galaxy' variety.

(3.) APPELLANTS resisted the notice and stated that the basis adopted for valuation of their goods was not correct since they were not manufacturing the 'galaxy' variety in their unit and the quantity of 'black' variety manufactured by them was less than 2% of the total production. They also stated that the benefit of Notification No. 2/95 had been wrongly denied to them. It was contended that the Department had not taken note of the fact that at the time of stock taking the quantity of breakages had not been taken into account properly and such quantity was lying in the factory premises itself. On the other hand for purposes of comparing stock during the verification the Officers had taken into account only the finished goods lying in the place of production and not breakages lying elsewhere in the factory.