2013 (3) TMI 184 - AT - Central Excise

Clandestine removal - Shortages in the stock of finished goods in all raw-material detected - demand of duty & penalty levied - Held that - There is no statement accepting clandestine removal of the goods by any authorized representative. Also there is no evidence of clandestine removal of the goods. Thus as decided in Commissioner of Central Excise, Kanpur v. Minakshi Castings (2011 (8) TMI 896 - ALLAHABAD HIGH COURT) mere shortages of finished stock, without any other independent evidence, cannot lead to inference of clandestine removal. Also see L.M. Steels Pvt. Ltd. v. Commissioner of Central Excise, Ghaziabad (2010 (10) TMI 316 - CESTAT, NEW DELHI) & Commissioner of Central Excise, Kolkata v. Hanuman Udyog (2007 (9) TMI 148 - CESTAT KOLKATA). As such, the appellate authority was justified in setting aside the penalty imposed upon the assessee inasmuch as the demand of duty was not being contested by the respondent, he rightly confirmed the same. Confirmation of demand in respect of furnance oil - As the Revenue is not disputing the fact of procurement of the same and its use in the boiler on trial basis. Inasmuch as furnace oil stand procured by the appellant, the credit of duty paid on the same was rightly availed by the respondent. No infirmity is found in the order of Commissioner (Appeals) - in favour of assessee.

Summary

Issues:
1. Shortages detected in stock of finished goods and raw materials involving duty.
2. Availment of Cenvat credit on Furnace oil and subsequent proceedings initiated.
3. Imposition of penalty and confirmation of demand by the original adjudicating authority.
4. Appeal against the order to Commissioner (Appeals) and subsequent decision.
5. Impugned order before the Tribunal by the Revenue.

Analysis:
1. The judgment revolves around the detection of shortages in the stock of finished goods and raw materials during a visit by Central Excise officers to the respondent's factory. The appellant admitted the shortages, leading to the deposit of the duty amount involved. However, the Commissioner (Appeals) held that mere acceptance of shortages does not necessarily indicate clandestine removal, citing precedents to support this view.

2. Apart from shortages, the appellant availed Cenvat credit on Furnace oil, which was later contested through show cause notices proposing demand and penalties. The Commissioner (Appeals, considering the statement of the authorized representative regarding the trial basis use of Furnace oil in the boiler, set aside the confirmation of demand and penalty based on relevant case law.

3. The original adjudicating authority confirmed the demand and imposed penalties based on the show cause notice. However, the Commissioner (Appeals) overturned the penalty in the absence of evidence supporting clandestine removal, focusing on the lack of weighment slips and inventories to substantiate the shortages.

4. The appeal before the Tribunal challenged the Commissioner (Appeals) decision, arguing against the setting aside of penalties related to shortages in finished goods and raw materials. The Tribunal, after reviewing the impugned order, emphasized the necessity of independent evidence to infer clandestine removal, citing relevant case laws to support the decision to set aside penalties.

5. Ultimately, the Tribunal rejected the appeal filed by the Revenue, upholding the decision of the Commissioner (Appeals) regarding the shortages in finished goods and raw materials. The Tribunal found no infirmity in the Commissioner's decision to set aside the confirmation of demand concerning the availed Cenvat credit on Furnace oil, as the procurement and use on a trial basis were not disputed by the Revenue.