2012 (4) TMI 520 - AT - Central Excise

Confiscation of the goods - Goods lying unaccounted in the factory premises - Shortage in stock - Held that - from the statements recorded of the various responsible persons of the appellant company that they have clearly indicated in reply to the show cause notice as well as during the statements recorded, that the Zinc Metal was issued for manufacturing of the final products but inadvertently was not recorded in the RG23 Part-I register. It is also seen that the charge of the department is of clandestine removal of such Zinc Metal from the factory premises. For such charge, the Revenue has not adduced any corroborative evidence of clandestine removal - In the absence of any corroborative evidence of clandestine removal, duty demand cannot be made on the presumptive grounds, either for removal of inputs as such or on the presumptive ground of manufacturing final products from the said goods. Accordingly, the demand of duty on the short found goods is unsustainable. Goods were recorded in their private records which is evident from the fact that they have been utilizing and declaring the goods to the banks as work in progress. I find it so from the statement submitted by the learned counsel before the Tribunal as regards work in progress for the month ending 30 June 2008 and in the said statement Zinc Residue and Zinc Horn is shown as WIP to the extent they were found excess during visit of officers. If the goods are in work in progress, the same cannot be called as final products. If that be so, the goods found in excess, in my considered view, cannot be held as offending goods as they have not reached the stage of recording in the RG-1 register - Decided in favour of assessee.

Summary

Issues:
Confiscation of unaccounted goods and demand of duty on short found goods.

Analysis:
The case involved an appeal against an order dated 18.12.2009 concerning the confiscation of excess Zinc Residue and Zinc Horn, and the demand of duty on the shortage of Zinc Metal. The appellant argued that the excess Zinc Residue was Work-in-Progress (WIP) and had been consumed in the manufacturing process. They contended that the shortage of Zinc Metal was due to a clerical error in recording the issuance for production. The lower authorities upheld the demand, penalties, and confiscation. The appellant relied on the judgment in the case of Atlas Conductors and subsequent cases to support their position.

Regarding the shortage of Zinc Metal, the Tribunal found that there was no evidence of clandestine removal or manufacturing of final products from the unrecorded metal. The appellant's explanations were accepted, and the demand for duty on the short found goods was deemed unsustainable. The judgment in the case of Atlas Conductors was cited to support this decision.

Concerning the excess Zinc Residue and Zinc Horn, the appellant demonstrated that these goods were declared as WIP, supported by private records and statements submitted to the bank. The Tribunal agreed that the goods were in progress and not yet recorded as final products. Therefore, the excess goods could not be considered offending goods. The judgments in the cases of Shree Rubber Plast Company and Srinivasa Frozen Foods Limited favored the appellant's position.

In conclusion, the Tribunal set aside the order of the first appellate authority, allowing the appeal in favor of the appellant. The decision was based on the lack of evidence for clandestine removal and the acknowledgment of the excess goods as WIP, not final products.