1. The question for decision in this appeal originally filed as Revision application to Government of India is whether the demand of Rs. 30,658.74 made by the Assistant Collector of Central Excise, Saharanpur by his order dated 25-3-1968 from the appellants and substantially upheld by the Collector of Central Excise, Kanpur by his order dated 4-3-1970 is correct.
2. It might be stated that the Government of India by their order No.1499/1972 dated 25-9-1972 had held that difference in weight of yarn on the minus side would not go beyond one per cent on account of natural causes and therefore they allowed abatement of duty to the extent of one per cent in the case. This order was challenged before the Allahabad High Court, who by their order dated 23rd August, 1972 quashed the Revisionary order passed by the Central Government and directed the Central Government to decide the revision afresh in accordance with law, and in the light of observations made in the judgment. It is thus that revision application is before the Tribunal to be disposed of as an appeal presented before it.
3. he appellants are manufacturer of Cotton Yarn falling under Tariff Item No. 18A of First Schedule to Central Excises & Salt Act, 1944 in their factory at Prem Nagar, Dehradun. The appellants inter alia maintain statutory accounts called R.G.I and E.B.4. They claim that before the yarn is entered into R.G.I prior to winding and reeling it is subjected to. conditioning by immersion in water tank or in live steam chambers. It is later that it is stored in loose in the finishing room and after it has lost its moisture contents before packing then it is entered in E.B.4. The appellants paid duty on yarn as per weight mentioned in E.B.4. The Excise authorities between April, 1967 to October, 1967 noticed that for the period 1-3-1961 till the end of the year 1967, the weight shown in R.G.I and E.B.4 did not tally i.e.
weight in E.B.4 was less than what was shown in R.G.I. The Assistant Collector of Central Excise by his order dated 25-3-1968 made five demands dated 24-4-67, 24-4-67, 31-5-67, 22-7-67 and 9-10-1967 totalling in all to Rs. 31,658.74. It appears that the Assistant Collector did not give any allowance for weight though the appellants claimed that this difference and loss in weight was due to natural causes and due to evaporation of moisture. The Collector of Central Excise, Kanpur, however, by his order-in-appeal No. 20/1970 dated 4-3-1970 held that the appellants should be allowed a loss upto 0.5% in respect of different types of cotton yarn on yearly basis. The Government of India in their revisionary order referred to above, which has been quashed by the Allahabad High Court held that the margin of the difference in weight of the yarn on the minus side would not go beyond 1 % on account of natural causes, therefore, allowed abatement of duty to the extent of 1%.
4. In the grounds of appeal, a number of grounds as to arbitrariness of the order, limitation, non-applicability of Rule-9(2), duty being leviable at the point of clearance, there being no clandestine removal have been raised. It also appears that after the orders of the Govt. of India the amount of demand was revised to Rs. 18,558.48, which has been paid under protest on 30-3-1973.
5. At the hearing of the appeal, Sh. M.D. Chowdary, learned Consultant for the appellants submitted that such loss in weight is natural and is due to avaporation of moisture. The appellants' factory was under Excise control and the average loss of weight varied between 1.41% to 3.06% during 1963-64 to 1966-67, the average worked out to 2.6% per year. He submitted that on facts and circumstances of the case, the appellants should have been granted an allowance to the extent of loss in weight claimed by them. At this stage, he also filed a communication dated January 15, 1980 from Ahmedabad Textile Industry's Research Association, Ahmedabad, addressed to the appellants, which reads that losses in weight will depend on the atmospheric conditions prevailing at each place of work/storage. The communication also sets out in a tabulated form, the percentage of moisture regain at different relative humidities. It also gives a formula for calculation of moisture regain.
He also relied on West Bengal Trade Notice No. 196/R.P.C1/CE/77 dated 27th August, 1977. All these documents are not helpful for decision of the point in controversy.
6. On behalf of the Department Sh. Rakesh Bhatia, S.D.R. while admitting that such losses do occur defended the orders passed by the lower authorities and left the matter entirely at the Tribunal's hand.
7. It might be pointed out that when the Bench persistently questioned the parties that such losses of weight must be a regular phenomenon in Cotton Mills and there must be material from which some definite conclusion in the matter could be drawn* None of the parties, however, could place any material before the.Bench in this regard.
8. We have carefully. considered the matter. It is well known that such losses do occur. The Department also does not dispute this. The Government of India had in their Revisionery Order granted an allowance of 1 % loss in weight to the appellants. The appellants have claimed loss in weight varying from 1.41% to 3.06% on an average 2.6% per year during the relevant period.
9. On the facts and circumstances of the case without laying down any general proposition from the material on record before us, we see no reason to disbelieve the appellants in their claim for loss of weight as aforesaid. We would therefore allow the appeal and set aside the demand. The amount of demand, if paid, shall be refunded to the appellants.