2015 (3) TMI 1139 - AT - Central Excise

Shortage in stock of finished goods - Held that - As find that the finished goods have been not physically counted but the stock taking was done on average basis. It is not the accurate and authentic method to ascertain the weight of the physical stock lying in the factory. There is every chance of the error creeping of such weighment. Verification carried out by the officer, being based on eye estimation is not reliable. Hence, the demand of duty raised on the shortages determined on the basis of the eye estimation is not sustainable. Therefore, we do agree with the observation of the ld. Commissioner (Appeals) that the stock taking of finished goods was done on eye estimation basis. In these circumstances demand is not sustainable. With taking of raw material in the Panchnama, it is mentioned that the raw material is in the bags of 50 kg each and bags have been counted physically. Therefore, the stock has been counted physically. Further, I have seen the raw material is in the stock register as on 17-7-2009 is 1258.935 MT against recorded stock as 1375.235, therefore, the shortage of works out to 608.935 MT of raw material instead of 725.235 MT. In these circumstances, the impugned order is modified to demand duty on shortage of raw material of 608.935 MT. With these observations, the matter is sent to the adjudicating authority to quantify the actual amount of duty payable by the appellant.

Summary

Issues:
Appeal against order on shortage of finished goods and raw material.

Analysis:
The case involved an appeal by both the assessee and the Revenue against an order regarding shortages of finished goods and raw material found during an investigation. The stock of finished goods was found short during stock taking, but it was done on an average basis, not physically counted. The Commissioner dropped the charge of shortage of finished goods due to the method of average weighment being unreliable. The Tribunal agreed that the stock taking was done on eye estimation basis, making the demand unsustainable. However, regarding the raw material shortage, physical counting was done, and the recorded stock did not match the actual stock. The Tribunal modified the order to demand duty on the reduced shortage of raw material and remanded the case for quantification of the duty payable. The Revenue's appeal was dismissed, and the assessee's appeal was remanded for the duty demand calculation on raw material. The Tribunal upheld the impugned order, except for some calculation errors, and ordered accordingly.