2012 (10) TMI 940 - AT - Central Excise

Duty demand - Shortage in stock - Held that - total stock of the appellant available in their factory on the date of visit of officer on 11-2-2009 was to the tune of Rs. 1037.059 MT. The shortages alleged by the Revenue are to the tune of 39.189 MT which are roughly around 3.7%. It is admitted case of the Revenue that no inventory were drawn by weighing the entire stock of the goods. The shortages were detected on the basis of a specific methodology (system of average weight) for weighment of finished goods and raw materials. I also find that Shri Shyam Sunder Trivedi, authorised signatory, in his on the spot statement agreed to such shortages as detected by the officers, who expressed his inability to advance any reason for the shortages. There is nothing in such statements to admit that such shortages were on account of any clandestine clearance of the final product. All these facts lead to only one conclusion that the shortages which may be made on the basis of average weight formula, were not the real but pseudo. Apart from that there is no evidence on record to allege any clandestine removal by the appellants. - there is no inculpatory statement of any person accepting such clandestine clearance nor is there any evidence on record to indicate upon clandestine removal, I find no reason to confirm the demand and imposition of penalty on the appellant - Decided in favour of assessee.

Summary

Issues:
Confirmation of duty and imposition of penalties based on shortages found during physical stock verification.

Analysis:
The appellant, engaged in manufacturing bars/rods, faced proceedings for duty confirmation and penalties after Central Excise authorities found shortages during a physical stock verification. The shortages of around 39.189 MT were detected, and a statement from the authorized representative admitting to the shortages was recorded. The adjudicating authority confirmed the demand and imposed penalties on the appellant and the representative. The Commissioner (Appeals) upheld this decision, leading to the present appeal.

Upon review, the Tribunal noted that the total stock available in the factory on the verification date was 1037.059 MT, with the alleged shortages amounting to approximately 3.7%. The Revenue's methodology for detecting shortages was based on average weight, not a full inventory check. The authorized representative admitted to the shortages without providing reasons for them, but there was no evidence of clandestine clearance of goods. The Tribunal referenced previous decisions emphasizing that mere acceptance of shortages without corroborative evidence of clandestine removal does not justify confirming duty demands.

Citing various precedents, the Tribunal concluded that without inculpatory statements or evidence indicating clandestine removal, there was no basis to uphold the demand and penalties against the appellant. As a result, the impugned order was set aside, and both appeals were allowed in favor of the appellants, providing them with consequential relief.