2012 (11) TMI 775 - AT - Central Excise

Shortages in the stock of Sponge iron - Held that - The weighment of the sponge iron was not actually done but the same was based upon the basis of weight of 1 cubic feet of sponge iron, thus it can be safely concluded that shortages arrived at by the officers were not real but were deceitful being based upon calculative method. No justification in demand of duty in respect of sponge iron - in favour of assessee.

Summary

Issues: Confirmation of demand and imposition of penalty for shortages in stock of MS ingots, final products, runners, risers, scrap, and sponge iron based on calculated method without actual weighment.

Analysis:
1. The judgment by Ms. Archana Wadhwa of the Appellate Tribunal CESTAT NEW DELHI addressed the issue of confirmation of demand and imposition of penalty against the appellants, engaged in manufacturing MS ingots, for shortages in various stock items noticed during a visit by officers to their factory.

2. The proceedings were initiated based on the shortages observed, leading to the passing of the impugned order confirming the demand and imposing penalties. The advocate for the appellants did not contest the confirmation of demand for most items but specifically challenged the duty demand of Rs.78,670 concerning sponge iron.

3. The advocate argued that the shortage of sponge iron was determined through a calculated method without actual weighment, as evidenced by the panchnama. He contended that the confirmation of demand for sponge iron was unjustified due to the lack of real weighment.

4. Upon reviewing the panchnama and considering the arguments, Ms. Archana Wadhwa found merit in the appellant's contention. The officers had calculated the weight of sponge iron based on the weight of 1 cubic feet of sponge iron without physically weighing the stock. This method led to pseudo shortages, not reflecting the actual quantity of sponge iron present.

5. Consequently, the Tribunal concluded that the demand of duty amounting to Rs.78,670 for sponge iron, along with the penalty, was not justified. The judgment set aside this particular demand while confirming the other demands and penalties that were not contested by the advocate.

6. In conclusion, the appeal was allowed based on the finding that the shortages in sponge iron were determined using a calculated method without actual weighment, leading to the setting aside of the duty demand and penalty associated with it. The judgment highlighted the importance of accurate assessment and weighment in such cases to avoid unjust penalties based on pseudo shortages.