2013 (9) TMI 456 - AT - Central Excise

Cenvat / Modvat - Goods Short Found - liability on the raw materials which were found short during the physical verification of the appellant s factory was liable to be discharged by the appellant as they were unable to give proper explanation for such shortage - To that extent, the adjudicating authority s findings on the point are correct, legal and does not suffer from any infirmity However there was strong force in the contentions raised by the ld. Counsel that if the inputs on which MODVAT Credit was availed were found short - the provisions as per the provisions of CENVAT Credit Rules/Central Excise Rules, 1944 during the relevant period was that the amount of duty of credit attributable to such inputs found short - needed only to be reversed and there cannot be any excess demand - This was a settled issue - Accordingly, upholding the confirmation of demand of duty on the inputs on which the MODVAT Credit was availed and found short - the correct quantum of duty liability needed to be worked out by the lower authorities based on the records - The lower authorities will work out the correct liability to duty of the credit availed on the inputs which were found short and recover the same from the assessee along with interest and also the penalties from the appellant-assessee under the provisions of Rule 57I and Rule 173Q of Central Excise Rules, 1944. Demand of Duty on the Finished Goods - Held that - The point needed to be considered by the adjudicating authority - The order to this extent was set aside and remanded back to adjudicating authority, who will follow the principles of natural justice, before coming to conclusion - The invoices which were initially raised was in the name of the some other dairy, while the so-called genuine invoice as claimed by the assessee was in the name of someone else - the appellant had produced certificate from Baroda District Co-operative Milk Producers Union Ltd., Mahand Dairy, and other government owned dairies, to whom they make supplies to justify their plea that there was no clandestine removal of the goods during the entire period - The summary rejection of such crucial evidence seems to be incorrect, inasmuch as if the total quantity of finished goods cleared by the appellant as per the annexure, in the form of fake and/or genuine invoice, tallies with the total quantity shown as received by the government owned dairies, it cannot be said that there were clandestine removal of the goods. Penalty - The adjudicating authority may consider the same after arriving at the correct figure of clandestine removal after reconciliation was done by him and may consider the imposition of penalty on the appellant-asessee as well as individuals.

Summary

Issues:
- Duty liability on raw materials found short during physical verification
- Demand of duty on finished goods allegedly clandestinely removed
- Confirmation of demand, penalties, and interest by adjudicating authority
- Reconciliation of quantities dispatched and received by government-owned dairies
- Imposition of penalties on company and individuals

Analysis:

Duty Liability on Raw Materials:
The Tribunal upheld the duty liability on raw materials found short during physical verification, as the appellant failed to provide a satisfactory explanation for the shortage. However, it emphasized that under the CENVAT Credit Rules, only the duty credit attributable to the short inputs should be reversed, not an excess demand. The lower authorities were directed to calculate the correct duty liability on the short inputs, recover it along with interest, and impose penalties under relevant provisions.

Demand of Duty on Finished Goods:
Regarding the demand of duty on allegedly clandestinely removed finished goods, the Tribunal noted discrepancies in the names of consignees in certain invoices. However, it also highlighted that several entries matched between genuine and fake invoices, indicating no clandestine removal. The Tribunal considered certificates from government-owned dairies supporting the appellant's claim and criticized the adjudicating authority for dismissing crucial evidence. It directed a thorough reconciliation of dispatched quantities with those received by dairies, emphasizing the need for a fair assessment by lower authorities.

Confirmation of Demand and Penalties:
The adjudicating authority's confirmation of demand, penalties, and interest in the first round of litigation was mentioned, leading to the current impugned order. The Tribunal stressed the importance of following principles of natural justice in such cases and remanded the matter for a comprehensive reevaluation by the adjudicating authority.

Reconciliation of Quantities with Dairies:
The Tribunal emphasized the necessity of reconciling the quantities dispatched by the appellant with those received by government-owned dairies to determine the correct figure of duty demand. It criticized the summary rejection of evidence supporting the appellant's case and instructed the lower authorities to conduct a detailed assessment before reaching a conclusion.

Imposition of Penalties:
The Tribunal left the decision on imposing penalties on the company and individuals to the adjudicating authority after the reconciliation of quantities and determination of the duty demand. It emphasized the importance of considering penalties only after arriving at the correct figures and following due process.

In conclusion, the appeals were disposed of with detailed instructions for the adjudicating authority to reevaluate the duty liabilities, reconcile quantities, and consider penalties based on a fair and thorough assessment while upholding principles of natural justice.