2007 (2) TMI 453 - AT - Central Excise

Issues:
1. Shortage of raw material of Alloy Steel.
2. Short payment of duty on Steel products.
3. Imposition of penalties under Central Excise Rules.
4. Bar on limitation for demanding duty.
5. Method of stock verification and plea of eye estimation.

Analysis:
1. Shortage of raw material of Alloy Steel:
The central excise officers detected a shortage of 21.692 MT of Alloy Steel raw material during a visit to the appellant's factory. The appellant's Director admitted the shortage, and the duty amount of Rs. 18,091 was debited in their account. The Tribunal noted that the stock of finished goods tallied with the R.G. 1 stock, indicating proper verification. The appellant argued that the shortage was due to eye estimation during stock verification. However, the Tribunal found that the method of weighment was industry prevalent and accepted by the appellant, making the demand of duty on the shortage of raw material valid.

2. Short payment of duty on Steel products:
An additional duty demand of Rs. 28,508 was raised based on a private document dated 5-9-1997, indicating a shortage of 7.919 MT of Steel products. The appellant contested this demand, arguing that the alleged shortage was negligible, approximately 2% of the total stock. The Tribunal agreed with the appellant, ruling that the demand based solely on a private document was not sustainable. Therefore, the demand of duty and the penalty of equal amount were set aside.

3. Imposition of penalties under Central Excise Rules:
The Joint Commissioner of Central Excise had imposed penalties on the appellant under Rule 173Q of the Central Excise Rules for violating various provisions. However, the Commissioner (Appeals) set aside the adjudication order, leading to the department filing an appeal. The Tribunal did not address the issue of penalties separately in the judgment, focusing primarily on the demand of duty and the method of stock verification.

4. Bar on limitation for demanding duty:
The appellant argued that the entire demand of duty was barred by limitation since the shortage was detected in 1997, but the show cause notice was issued in 2001. The respondent contended that there was no suppression of facts to evade duty payment, leading to the demand being time-barred. The Tribunal considered relevant case laws cited by both parties and concluded that the demand of duty based on the shortage of raw material was not barred by limitation.

5. Method of stock verification and plea of eye estimation:
The appellant claimed that the stock verification was done based on eye estimation, leading to discrepancies in raw material assessment. However, the Tribunal found that the weighments were conducted as per the directions of the appellant's Director and that the stock of finished goods was accurately verified. The Tribunal rejected the appellant's plea of eye estimation and upheld the demand of duty on the shortage of raw material, emphasizing the industry prevalent method of weighment.

In conclusion, the Tribunal upheld the demand of duty on the shortage of raw material of Alloy Steel while setting aside the demand and penalty related to the short payment of duty on Steel products. The judgment also addressed the issue of limitation for demanding duty and the method of stock verification, emphasizing the importance of accurate weighment practices in the industry.

← Previous Next →