AI Structured Summary
Not yet generated for this judgment
Judgment
Name of
item","Declared
stock
(MT)","Stock found
during
physical
verification.","Shortage/
Excess
Quantity.","Rate
per
M.T.","No. & Date
o f invoice
from which
rate
ascertained",Value,"Duty @
12/50%
M.S.Billets,22.28,9.91,12.370,21400,"80790
Dt.08.06.16","2,64,718","33,090
Pig Iron,1160.77,385.458,775.312,17000,"4454
dt.22.05.16","1,31,80,304","16,47,538
Total,,,,,,,"16,80,628
record, nor alleged, it was held that the apparent shortage cannot be termed as goods clandestinely removed. It was also observed that the apparent",,,,,,,
difference/shortage in weight works out to 0.018% in respect of billets as compared with the annual production and 3.34% in respect of the pig iron,",,,,,,,
as the appellant have received 22,525.60 MT of pig iron during the last 18 months.",,,,,,,
Being aggrieved, the Revenue preferred appeal before the Commissioner (Appeals) on the ground that the Asstt. Commissioner has erred in",,,,,,,
observing that the stock verification was not done by actual weighment but was done on an approximate basis. It was contended that the stock,,,,,,,
verification was done in the presence of independent witnesses and the Dy. Manager (Accounts), Representative of the appellant. Further, the",,,,,,,
assistance was taken of Dinesh Patel, Surveyor of SECL, a PSU. Further, during the course of verification and drawing of panchnama, the stock",,,,,,,
taking was not disputed by the Dy. Manager (Accounts), Further, no retraction or dispute with regard to stock taking was filed later on, and the",,,,,,,
appellant have also reversed the duty so calculated on the date of inspection by debiting in the cenvat register The stock taking was done by way of,,,,,,,
ascertainment by volumetric method by multiplying the volume with the density of the heap i.e. conversion factor. It was further contended that the,,,,,,,
appellant has suo moto debited the duty, on such shortage. Further, the Asstt. Commissioner has erred in observing that there is no corroborative",,,,,,,
evidence on record of clandestine removal “Save and Except†the apparent shortage. Further, reliance was placed by the Revenue on the ruling",,,,,,,
in Shiva Smelters Pvt. Ltd. â€" 2016 (338) ELT A-228 (AP), wherein with reference to Rule 9(5) of CCR, it was observed by the High Court of",,,,,,,
Andhra Pradesh, that the manufacturer of final product is required to maintain proper record for receipt, disposal and consumption of inventory of",,,,,,,
input, in which relevant information regarding the duty paid character, further burden of proof as regards admissibility of cenvat credit lies upon the",,,,,,,
manufacturer for taking such credit. It was not the obligation of the Revenue to prove clandestine removal of the raw materials.,,,,,,,
Ld. Commissioner (Appeals) differed with the findings of the Adjudicating Authority and further observed that in view of there being no protest,,,,,,,
subsequent to the date of Panchnama, as regards the difference or shortage of stock, the shortage is admitted, which is unexplained. Further, it was",,,,,,,
observed that the admitted facts need not be proved. Further, observed that in view of Rule 9(5) of CCR, it is the obligation of the manufacturer to",,,,,,,
keep proper records of receipts, utilization and production for verification by the Department. Accordingly, ld. Commissioner (Appeals) was pleased to",,,,,,,
set aside the order-in-original and confirmed the demand along with the interest and further equal amount of penalty was imposed under Section 11,,,,,,,
AC (1) (C) of the Act.,,,,,,,
Being aggrieved, the appellant-assessee is before this Tribunal.",,,,,,,
Ld. Counsel, Ms. Surabhi Sinha urges that the ld. Commissioner has without finding the observations and findings to be incorrect in the order-",,,,,,,
inoriginal, has erroneously set aside the adjudication order and confirmed the demand, in absence of any adverse materials on record. This Tribunal",,,,,,,
has repeatedly held that no adverse inference can be drawn for apparent shortage in absence of any material evidence on record, indicating",,,,,,,
clandestine removal, for apparent shortage in such type of industry, wherein the raw material is Iron Ore, Pig Iron, etc. The quality and the moisture",,,,,,,
content varies from consignment to consignment. Similarly in case of coal also, there is variation in the quality being ash content, volatile material,",,,,,,,
carbon content, etc.. Thus, yield varies on these several factors and also, on the weather conditions, and also on the condition of the furnace/kiln. As",,,,,,,
the finished product at the time of manufacture is in hot molten condition, the production is recorded on estimated basis. Although the appellant makes",,,,,,,
periodical adjustment from time to time for process loss or burning loss, but still there are bound to be some error and/or apparent difference. Further,",,,,,,,
admittedly, the Accounts Clerk or Data Entry Operator was on leave for the last few days and also at the time of inspection and thus, the entries were",,,,,,,
incomplete in the computer â€" stock register, which was maintained on the computer. The data given by the Dy. Accounts Manager at the time of",,,,,,,
inspection is only approximate figures, and not the exact figures. Further debiting of the duty worked out by the officers on the apparent shortage, does",,,,,,,
not amount to admission of clandestine clearance. It was also urged that the apparent shortage is less than 1% in case of M.S. billets and about 3% in,,,,,,,
case of pig iron, which are also in the tolerance limit, but they have not been erroneously considered while issuing the show cause notice. The findings",,,,,,,
recording by the Adjudicating Authority regarding insignificant variation as regards the shortage being within the tolerance limit, has not been found to",,,,,,,
be wrong or erroneous by the Commissioner (Appeals). Further, the Commissioner (Appeals) has observed the facts on record, that the appellant has",,,,,,,
filed their periodical returns being Form ER-1, ER-4, ER-5, ER-6, etc. There is no allegation that the appellant has not maintained proper books of",,,,,,,
accounts and other statutory records. Admittedly, as the Computer Data Entry Operator was on leave, the data assessment could not be assessed at",,,,,,,
the time of panchnama proceedings. Further, the Commissioner has ignored the facts that the appellant has given cogent explanation for the apparent",,,,,,,
variation in stock, which has not been found to be untrue, and as such, adverse inference by the ld. Commissioner (Appeals) is erroneous and without",,,,,,,
any basis. It is also urged that the estimation of stock on the basis of measurement of the height of the heap, does not give the exact quantity and there",,,,,,,
is bound to be some percentage of error in such estimation process. Such process of estimation of stock is not provided in the scheme of the Central,,,,,,,
Excise Act read with Rules. The officers should have gone for actual weighment of the stock when they have a doubt of shortage beyond tolerance,,,,,,,
limit. This being not done, the adverse inference by adopting the volumetric method of stock valuation cannot lead to adverse inference. Moreover in",,,,,,,
view of the percentage of less than 1% in case of M.S. Billets and about 3% in case of Pig Iron. The appellant have further placed reliance on some,,,,,,,
rulings, which are as follows:-",,,,,,,
I. Associated Cylinder Industries â€" 1990 (48) ELT 640 (T),,,,,,,
The Tribunal has held that comparison between physical stock and RG-I Register only shows whether statutory record was properly maintained or,,,,,,,
not. However, that itself is not sufficient to prove conclusively that there was any clandestine removal. For establishing charge of clandestine removal,",,,,,,,
either direct physical evidence by way of seizure of goods or documents or there must be sufficient circumstantial evidence to show preponderance of,,,,,,,
probability.,,,,,,,
II. Sayaji Iron & Engg. Co. (P) Ltd. â€" 1990 (45) ELT 104 (T) ,it was held that irregularities in maintenance of RG-1 Register cannot be",,,,,,,
conclusive evidence for clandestine removal of goods.,,,,,,,
III. J.C. Rolling Mills â€" 2012 (276) ELT 254(T,) it has been held that every shortage cannot be presumed to be case of clandestine removal in",,,,,,,
absence of other corroborating evidence. However, charge of improper maintenance of accounts can be sustained.",,,,,,,
IV. CCE Vs. Minakshi Castings â€" 2011(274)ELT 180 (All.) ,it has been held that there is no matierla or evidence of any kind to support the",,,,,,,
findings, that there was clandestine removal, which did not tally with the physical stock. In substance, itw as found that thee was shortage of finished",,,,,,,
goods. The shortage of finished goods by itself could not unless it is related to clandestine removal of finished goods for which there was no material,,,,,,,
evidence, infer evasion of excise duty, and thus no penalty can be imposed.",,,,,,,
V. Vishwa Traders Private Limited â€" 2012 (278) ELT 362 (T), the Tribunal’s order was challenged before the Gujarat High Court where",,,,,,,
the Division Bench refused to inference with the findings recorded therein which logically infers that the ratio decided by the Tribunal in the said case,,,,,,,
as below was affirmed [2013 (287) ELT 243 (Gujarat)].,,,,,,,
It is further urged that ruling of the Allahabad High Court in Minakshi Castings (supra) has been consistently followed by this Tribunal in several,,,,,,,
similar cases, particularly, in the case of Behariji Marketing Pvt.Ltd. â€" 2015 (317) ELT 298 (T) and Hon’ble Delhi High Court in the case of",,,,,,,
Shakti Zarda Factory â€" 2015 (321) ELT 438 (Delhi HC â€" DB), wherein, it is held that initial burden was on the Revenue to prove the allegation of",,,,,,,
clandestine receipt of raw materials and finished goods.,,,,,,,
Ld. Authorised Representative for the Respondent/Department relies on the impugned order.,,,,,,,
Having considered the rival contentions, I find that the method of stock verification adopted by the Revenue in this case (during inspection) is not",,,,,,,
correct and free from error. Further, such stock taking is not provided under the scheme of the Central Excise Act read with the Rules. Further, I find",,,,,,,
that the appellant has given cogent explanation for the apparent shortage, which has not been found wrong by the court below. Further, I find that",,,,,,,
such apparent shortage is less than 1% in case of M.S. Billets and about 3% in case of Pig Iron, which is within the tolerance limit in this type of",,,,,,,
industry. I further find that Save and Except the bald allegation made by the Revenue of clandestine removal, there is no other allegation in the show",,,,,,,
cause notice as regards the quantitative mismatch of input output ratio, etc. I further hold that deposit of duty by the assessee at the instructions of the",,,,,,,
officer at the time of inspection, does not amount to admission of clandestine removal. Further, I find that the Hon’ble High Courts and this",,,,,,,
Tribunal have repeatedly held that insignificant shortage in the stock of raw materials and finished goods does not lead inevitable evidence of,,,,,,,
clandestine removal, in absence of corroborative material on record.",,,,,,,
Accordingly, this appeal is allowed and the impugned order-in-appeal is set aside. The order-in-original is restored. The appellant is entitled to",,,,,,,
consequential benefits in accordance with law.,,,,,,,
[Order pronounced on 07.07.2021],,,,,,,