Full Judgment
3. The relevant facts in brief relating to the present proceedings are as follows: (a) Six show cause notices demanding differential duty relating to the period from June, 1985 to August, 1990 were issued during the year's 1988-91 and the total amount involved is Rs. 3,88,718.71.
(b) The show cause notices were issued apparently on audit objections which were reportedly closed.
4. The issue involved is that the appellant has claimed incurring burning loss of about 10% in respect of the raw materials used in the manufacturing of rerollable products by hot-rolling method. The appellant relies on guidelines of the Ministry of Steel and Heavy Industries issued under letter No. PS-55(6)62, dated 19-3-1963 which was reiterated by the Steel Ministry in the clarification in PC/P&P/6(1)/Gen/1363, dated 31-3-1989 addressed to All India Steel Rerollers Association. In these letters the Ministry of Steel considers the burning loss of 10% from re-rolling of billets, blooms and slabs to finished products as normal. It also clarified that the same should be treated only for the purpose of guidance and the actual loss would depend upon the raw material and the finished products to be rolled.
5. The Central Excise authorities are seeking to hold that 10% loss is high and for that purpose relies on the circular issued by CBEC vide letter No. MF (DR) CBE & CF No. 261/6/28/80-CX-8, dated 19-10-1981.
This circular envisages that authorities can accept a loss of 1% without any scrutiny, but if more losses are claimed then the authorities should scrutinize the case and satisfy themselves about the genuineness of the claim and, if need be, technical advice should be sought for.
6. The guidelines of Ministry of Steel which is in the nature of a technical opinion cannot be brushed aside. The circular of CBEC only envisages that the authorities should examine critically losses reported in excess of 1%. In the present case no evidence by way of investigation has been brought out to disallow the claim of 10% of burning loss. Since Ministry of Steel has reiterated the claim of admissibility of 10% burning loss in their 1989 circular also and since the demand relates to the period from 1985 to 1990 and since the demands were issued based only on audit objection and not based on any evidence by way of investigation, the demand is not sustainable. It is claimed by the appellant that the burning loss have been brought down to 7% to 8% during the period 2001 onwards.