2014 (8) TMI 970 - AT - Central Excise

Denial of CENVAT Credit - Clandestine removal of goods - Shortage of goods - Held that - The order of the Commissioner (Appeals) itself mentions that the quantity of the scrap was determined by eye estimation and the quantity of MS Ingots was determined on the basis of average weight of one ingots. When it is an admitted position that the quantity of the finished goods was determined on the estimation basis only and the quantity of scrap was determined on eye estimation, the alleged shortage of scrap and MS ingots cannot be treated as real shortage and the goods allegedly found short cannot be treated as having been cleared clandestinely without payment of duty. In view of this, the impugned order is not sustainable. The same is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Shortage in stock of finished goods and Cenvat credit availed MS scrap.
2. Imposition of penalty under Section 11AC.
3. Appeal against the order of the Commissioner (Appeals).

Analysis:
1. The appellant, a manufacturer of MS Ingots from scrap, faced allegations of shortage in the stock of finished goods and Cenvat credit availed MS scrap after a visit by Central Excise officers. The stock was determined based on average weight and eye estimation. The appellant's Director could not provide an explanation for the shortage, leading to the deposit of the duty amount. The Assistant Commissioner confirmed the duty demand and imposed a penalty, which was reduced by the Commissioner (Appeals) to 25%. The appellant contended that the shortage was not real, but the plea was rejected based on the Director's admission. The Tribunal noted that the quantities were determined by estimation, concluding that the alleged shortage could not be considered real, setting aside the impugned order and allowing the appeal.

2. The imposition of a penalty under Section 11AC was a significant issue in the case. The Assistant Commissioner had imposed a penalty equal to the duty demand, which was later reduced to 25% by the Commissioner (Appeals). The appellant challenged the penalty, arguing that the shortage was not genuine. The Tribunal, after considering submissions from both sides, found that the shortage was determined by estimation and not actual weighment, leading to the conclusion that the penalty was not justified. As a result, the impugned order was set aside, and the appeal was allowed.

3. The appeal was filed against the order of the Commissioner (Appeals) upholding the duty and penalty demands. The appellant contested the findings, stating that the shortage was not real and there was no evidence of clandestine clearance without duty payment. The Tribunal agreed with the appellant's argument, emphasizing that the determination of quantities by estimation did not support the conclusion of a genuine shortage. Consequently, the Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, ruling in favor of the appellant.