2011 (8) TMI 206 - AT - Central Excise

Demand - Search - shortage of 7, 277 kgs of one of the raw materials - the appellant submitted that there is absolutely no other evidence of clandestine removal of the finished goods other than the shortage of material found in the factory. He also submits that other than the shortage of one raw material no discrepancy in respect of other raw material or finished product was found - Held that - the Tribunal cited by the ld.Counsel in the case of Remson Industries Ltd. Vs. CCE Delhi (2007 -TMI - 1582 - CESTAT NEW DELHI) consider that it would be appropriate to follow the precedent decisions cited by the ld.Counsel and set aside the demand of duty on the finished goods - Decided in favour of assessee

Summary

Issues:
1. Shortage of raw material found during a search at the appellant's premises leading to duty demand and penalty imposition.
2. Discrepancy in the imposition of penalty on the appellant and the partner.
3. Admissibility of shortage as evidence of clandestine removal.
4. Comparison with previous cases regarding duty demand on finished goods.
5. Responsibility of the manufacturer to properly account for goods and reverse CENVAT Credit.

Analysis:

1. The case involved a shortage of raw material, Di Methyle Terephthalate, during a search at the appellant's premises, leading to duty demand and penalty imposition. The appellant's Authorised Signatory admitted the shortage and its use in manufacturing Wire Enamel, sold without paying Central Excise duty. Proceedings were initiated against the appellant, second appellant, and the partner, resulting in demand confirmation, interest, and penalty imposition on the second appellant.

2. The issue of penalty imposition on the appellant and the partner was raised, with the Revenue contending that both should be penalized. The Commissioner (Appeals) held that if a penalty is imposed on the firm, it cannot be imposed on the partner. This discrepancy led to appeals by the assessee, second appellant against duty demand and penalty, and the Revenue against the dropping of proceedings on the partner.

3. The admissibility of shortage as evidence of clandestine removal was debated. The appellant's counsel argued that mere admission of shortage without other discrepancies should not lead to duty demand, citing a precedent where a similar situation did not sustain duty demand due to lack of evidence of clandestine activities.

4. Comparison with previous cases, specifically the case of Nissan Thermoware Pvt.Ltd., was made to determine the duty demand on finished goods. The Tribunal and Hon'ble High Court decisions in the Nissan Thermoware case emphasized the need for evidence of clandestine activities to sustain duty demand, which was absent in the current case.

5. The responsibility of the manufacturer to properly account for goods and reverse CENVAT Credit was highlighted. The appellant agreed to reverse the CENVAT Credit availed on the raw material found short, acknowledging the manufacturer's duty to account for goods accurately. This step was deemed necessary legally, showcasing the fairness of the appellant's advocate in conceding this liability.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, comparisons with previous cases, and the legal responsibilities of the manufacturer in such situations.