2014 (2) TMI 967 - AT - Central Excise

Demand of differential duty - Shortage in stock - Held that - there is a shortage of 11.8 tones of finished goods in the factory premises when the officers visited the said premises. Today also, there is no dispute as to the shortage of finished goods as the appellant herein is only claiming that the shortage is not worked out correctly and they are unable to ascertain the correct shortage since the Revenue has not given the calculation sheet which was drawn at the time of stock taking. In my considered view, the shortage was sought to be explained by the Manager and the Director of the company by giving an explanation that over a period of time there could be shortage due to the sizing of all the ingots manufactured by them. To my knowledge, even such an explanation could have been accounted for only few kgs but could not be considered valid for entire shortage which has been noticed. Shortage which is detected by the department is of the finished goods manufactured by the appellant. I also note that the appellants have never challenged the shortages. On the background of such a factual matrix, I find that there is no corroborative evidence adduced by the Revenue either in form of any statement of the purchaser or a transporter or the statement of the director or the general manager as to the allegation of removal of these goods which were found short. Since there is no allegation of clandestine removal, but there is a shortage of finished goods. I hold that the appellants are liable to pay the excise duty on the said finished goods shortages which is noticed by the authorities during the stock verification. As regards the penalties imposed on the individuals who are General Manager and Director of the appellant-assessee, I find that there is no reason for visiting them with penalty under Rule 26 of the Central Excise Rules, 2002 inasmuch as, there is no evidence of there being a clandestine removal of the finished goods nor there is any role attributed to the individuals/appellant in the shortages which was noticed during the stock taking by the authorities. In the absence of any such evidences, I am of the view that the penalties imposed on these individuals unsustainable and are liable to be set aside - Decided partly in favour of assessee.

Summary

Issues:
- Discrepancy in stock quantity of Bronze Ingots
- Demand of Central Excise duty and penalties
- Calculation of shortage of finished goods
- Imposition of penalties under Section 11AC and Rule 26 of CER, 2002
- Confirmation of duty demand and interest
- Applicability of penalties on individuals

Discrepancy in stock quantity of Bronze Ingots:
The case involved a discrepancy in the stock quantity of Bronze Ingots at the unit's premises, leading to a demand for Central Excise duty and penalties. During a search, a shortage of 11800 Kgs. of Bronze Ingots was detected, with the General Manager and Director admitting to the shortage. The unit voluntarily debited the duty amount towards the shortage. A show cause notice was issued, and subsequent orders confirmed the duty demand and imposed penalties.

Demand of Central Excise duty and penalties:
The appellants challenged the demands, arguing that the method of calculating the shortage was incorrect. They contested the lack of supporting evidence for clearance of goods and questioned the penalties imposed under Section 11AC and Rule 26 of CER, 2002. The Revenue maintained that the stock taking was conducted correctly, and shortages indicated removal without duty payment.

Calculation of shortage of finished goods:
The Tribunal found a shortage of finished goods at the premises, with the appellants disputing the calculation methodology due to missing worksheets. Despite explanations for cumulative shortages, the Tribunal held the appellants liable for excise duty on the detected shortages, citing precedents and lack of evidence for clandestine removal.

Imposition of penalties under Section 11AC and Rule 26 of CER, 2002:
Regarding penalties, the Tribunal set aside the penalty under Section 11AC due to lack of evidence for fraud or evasion. Instead, a penalty under Rule 25(1) of CER, 2002 was imposed for record-keeping violations. Penalties on individuals, the General Manager and Director, were deemed unsustainable without evidence of their involvement in clandestine removal.

Confirmation of duty demand and interest:
The Tribunal confirmed the duty demand but ruled in favor of the appellant regarding interest payment, citing the absence of evidence for clandestine removal and immediate duty payment upon detection of shortages.

Applicability of penalties on individuals:
The penalties on the individuals were set aside due to the lack of evidence linking them to clandestine removal, leading to the disposal of all appeals accordingly.