By TIOL News Service

MUMBAI, JUNE 23, 2017: THE appellant,a 100% EOU, manufactures Brass Parts of machines [Ch. 8538].They obtained permission to send Brass Scrap to their job worker for conversion into brass rods.

From scrutiny of their records, it was found that permissible burning loss was between 5% & 7.5% whereas the average burning loss during conversion was shown as 15%.

The adjudicating authority confirmed the demand on the difference of burning loss between 15% and permissible 7.5%, therefore, appellant is before the CESTAT.

It is submitted that the entire demand was confirmed on presumption and assumption, as the same was worked out on theoretical basis; that the lower authorities mainly utilized SION Norms for calculating the burning loss and which is not proper and legal; that SION norms is only used for import and export of the goods; that whatever quantity of brass scrap was sent to the job worker, the same was, after conversion, returned in the form of brass rod; that there is no case of the department that either the brass scrap which was cleared to the job worker was diverted otherwise or the same was used in the brass rod which was cleared clandestinely. Reliance is also placed on the decisions in Kirloskar Oil Engines Ltd - 2017-TIOL-65-CESTAT-MUMand Uniworth Textiles Ltd. - 2013-TIOL-13-SC-CUS in support.

The AR reiterated the findings of the lower authorities.

The Bench observed -

++ I find that there is no dispute that the quantity of brass scrap sent by the appellant to the job worker against which the entire quantity was processed and whatever resultant product emerged that is brass rods was returned by the job worker to the appellant. It is not the case of revenue that due to burning loss, any quantity of either brass scrap or processed rods has been diverted somewhere else instead of bringing to the factory by the appellant. For such situation, whether there is burning loss of 7.5% or even 15% that alone cannot be reason to demand the duty.

++ Moreover, in the entire proceedings it was not made clear that on which goods the duty was demanded. Annexure “B” enclosed with the show cause notice also does not show the nature of the goods on which the duty was demanded and it only mentioned the quantity of excess burning loss.

Noting that the facts involved are identical to the case of Kirloskar Oil Engines Ltd. (supra) it is concluded that the entire demand worked out by taking the SION norms provided in the Foreign Trade Policy is not correct; that there is always a difference between the input output norms given in SION and the actual input output ratio in the physical manufacture of the goods and, therefore, the SION norms cannot be applied in the facts of the present case.

Concluding that the impugned order is not sustainable, the same was set aside and the appeal was allowed.

(See 2017-TIOL-2144-CESTAT-MUM)