2012 (2) TMI 427 - AT - Central Excise

Discrepancy in RG-1 Register - Shortage of approximately 1% in the quantity of goods accounted in RG-1 register - Held that - It is not possible to achieve exact match between goods accounted in bulk and goods accounted in packed condition. We note that the percentage difference detected is very minimal. Further in almost all commodities the manufacturers who want to maintain their reputation is likely to adopt practices by which the quantity in the retail pack is not less than what is declared on the pack. Since the assessment is based on MRP of the product this does not result in any revenue loss. This type of cases cannot be sustained without proof of clandestine removal and no such proof has been adduced - Decided against Revenue.

Summary

Issues:
Alleged clandestine removal of goods without payment of duty based on discrepancies in quantity accounted for in production records and RG-1 Register.

Detailed Analysis:
The case involved the respondents engaged in manufacturing Herbal cream and Shampoo falling under specific headings of the Central Excise Tariff. The Revenue alleged a shortage of approximately 1% in the quantity of goods accounted for in the RG-1 register in packed form compared to the quantity accounted to be produced in the batch register during the period 2002-03. This alleged discrepancy led to the issuance of a Show Cause Notice demanding duty on the goods supposed to have been cleared without payment of duty.

The Show Cause Notice was adjudicated, confirming a duty demand along with interest. Additionally, penalties were imposed on both the respondent and the Manager of the company under relevant sections and rules. The respondent appealed this decision before the Commissioner (Appeals), who accepted the plea that the difference in quantity was due to various factors such as excess quantity in retail packets, spillage during packing, evaporation, and errors in departmental calculations. Disagreeing with the Commissioner (Appeals), the Revenue filed an appeal.

During the proceedings, the Ld. AR for Revenue argued that even if the quantity in retail packs exceeded the declared amount, it could still constitute removal of goods without proper accounting. The respondent's defense included the assertion that achieving an exact match between bulk and packed goods is nearly impossible due to factors like evaporation and spillage. They also highlighted their commitment to maintaining product quality and compliance with standards, ensuring the quantity in retail packs was not less than declared. Since the assessment was based on the Maximum Retail Price (MRP), they contended that there was no revenue loss, especially considering the practices followed by manufacturers to uphold their reputation.

After considering the arguments from both sides, the Tribunal found merit in the respondent's contentions. They noted the minimal percentage difference in quantity and acknowledged the industry practice of slightly overfilling retail packs to align with declared quantities. Emphasizing that the assessment was based on MRP rather than the actual quantity cleared, the Tribunal concluded that without evidence of clandestine removal, the case against the respondents was not sustainable. Consequently, the appeals filed by the Revenue were rejected based on the lack of merit in their arguments.