Per Archana Wadhwa - The appellants are engaged in the manufacture of Water Bottles, Water Jugs, Casseroles and Tiffins etc. of insulated ware falling under Chapter 39 of the Central Excise Tariff Act, 1985. There factory was visited on 15.7.1996, who conducted various checks and verification. During the course of verifications of stock of raw materials, one of the raw material i.e. HD was found short to the extent of 9975 Kgs, as compared to the stock shown in RG-23A, Part-I register. The Director of the company, admitted the use of the same in the manufacture of water jugs cleared clandestinely without payment of duty. They also debited duty amount of Rs. 1,23,464/- in their modvat account.

2. On the above basis, proceedings were initiated against the appellants which culminated into orders passed by the authorities below. The matter was ultimately remanded by the Tribunal to Commissioner (Appeals) for fresh decision after considering the main ground of appeal raised by the assessee. The impugned order stands passed by Commissioner (Appeals) in de-novo proceedings. The appellant had raised the following grounds before Commissioner (Appeals) :-

(i) Appellant submitted that they were not granted the copies of seized records and relied upon documents.

(ii) The physical stock of all the finished products as well as inputs duly tallied with records except the shortage of one input i.e. HD by 9975 Kgs.

(iii) There was no evidence supporting the allegation of illicit clearance and demand was confirmed merely on the ground that the Director had voluntarily given the statement. The statement was not retracted to avoid further litigation.

(iv) For the manufacture of insulated wares of plastic other inputs like Polyol and Isocynate is absolutely essential and same were tallying.

(v) The modvat credit available on inputs was higher than the Central Excise liability on finished product, as duty on water jugs i.e. 10% and works out to be Rs. 1,23,464/- and modvat credit availed on inputs works out to the tune of Rs. 1,29,757.95 @ of 25%. The manufacturer would have been benefited if they avail modvat credit and clear the goods after proper accounting.

(vi) The officer presumed that there is no material lying in process.

(vii) No evidence is available to substantiate the clandestine clearance.

(viii) It is settled principle that the case of clandestine removal cannot sustain on the basis of assumptions and presumptions. The appellant referred to various judgments.

(ix) Penal provisions under Rule 173Q(2) is applicable only in case of specific contravention of the nature enumerated at sub-clause (2) to Rule 173Q. The appellant submitted that there is no such contravention in the present facts of the case and there are no grounds for invoking such extra ordinary provisions. It is further submitted that the provisions of Rule 173Q(2) has been duly rescinded from the Central Excise Rules, 1944 much before the passing of order vide Notification No. 38/2000(NT) dated 12.5.2000.

(x) They further submitted in written submission that the demand is time barred since investigation being over on 15.7.96 and SCN was issued on 18.1.2000, after one year from the date of knowledge of facts with the department. They relied upon various judgment in this regard.

(xi) The SCN merely asserts imposition of penalty under Rule 173Q and assessee should be categorically informed about the nature of penal proceedings and non reference to particular clause for imposition of penalty under Rule 173Q leads to denial of Natural Justice. They relied upon Hon'ble Supreme Court in case of Amrit Foods vs. CCE, UP – 2006 (72) RLT 9 (SC)=2005 (190) ELT 433 (SC).

3. The appellate authority has not accepted the above submissions on the ground that the appellants have failed to account for the main raw material and there are inculpatory statements by the Director of the Company. Accordingly, he has held against them and hence the present appeal