2004 (8) TMI 590 - AT - Central Excise

Summary

Issues:
1. Duty demand on shortages found during stock challenge.
2. Proper verification and weighment of goods during stock challenge.
3. Cross-examination of panchas in stock challenge.
4. Legal requirements for stock challenges and presence of witnesses.
5. Director's statement and explanation for shortages.
6. Appellant's failure to explain shortages and clandestine removal.

Analysis:

1. The appeal concerned the confirmation of duty demand on shortages found in the stock of raw materials and finished goods during a stock challenge conducted by Central Excise officers at the factory premises. The appellant, a manufacturer of Aromatic Chemicals, was asked to explain the discrepancies, and the lower authorities upheld the duty demand and imposed a penalty.

2. The appellant's advocate argued that proper weighment of goods was not done during the stock challenge and requested cross-examination of the panchas involved. Citing case law, it was contended that duty cannot be demanded for shortages without proper verification and weighment of goods, especially for items like Sulphuric Acid and LDO contained in tankers.

3. The advocate highlighted the importance of cross-examining panchas in stock challenges to ensure the accuracy of the process. Referring to legal precedents, it was emphasized that the statement of a Manager alone is insufficient to prove clandestine removal, and physical stock verification is crucial.

4. The Tribunal observed that stock challenges were conducted in the presence of panchas witnesses, which was considered an extra precaution rather than a legal requirement. The Manager certified the figures during the challenge, and the Director later admitted to the shortages. The Tribunal noted that the appellant's delayed objection to the stock challenge's correctness was not valid, as defects should have been raised during the process.

5. The Director's failure to provide a satisfactory explanation for the shortages led the Tribunal to conclude that the shortages were likely due to clandestine removal. The appellant's inability to account for the missing goods and the lack of a plausible explanation supported the department's decision to uphold the duty demand.

6. Ultimately, the Tribunal rejected the appeal, emphasizing the appellant's responsibility to address discrepancies during the stock challenge process and the importance of providing timely and credible explanations for shortages to avoid allegations of clandestine removal.