2015 (2) TMI 33 - AT - Central Excise

Shortage and excesses of goods found - Held that - Entire case of the Revenue for arriving at the finding of the clandestine removal is based upon the shortages conducted at the time of visit of the officers. Similarly, excess found goods stand confiscated along with imposition of penalty on the sole ground that the same were not entered in the statuary records. - It is seen that appellants are manufacturing different varieties of tiles and shortages and excesses were found only in one variety. Apart from the said shortages, and the statement of representative admitting such shortages, there is no other evidence of record to show that such alleged shortages were cleared by the appellant in a clandestine manner. It is well settled law that shortages by itself cannot be held to be sufficient evidence to conclude the clandestine activities of an assessee. In the absence of any evidence, I find no justification for confirmation of demand or for imposition of penalty on the appellant, on the finding of clandestine removal. As regards excesses, it stand explained that goods in question were not upto the mark and they had applied for destruction of the same. In any case, I find that it is not the Revenue's case that excess found impugned goods are meant for clandestine removal or they are in ready to move condition. As such, I find no justification for confiscation of the same or for imposition of penalties. - Decided in favour of assessee.

Summary

Issues:
1. Shortages and excesses found during Central Excise officers' visit.
2. Reconciliation statements submitted by the appellants.
3. Allegations of clandestine removal based on shortages and excesses.
4. Confiscation of excess goods and imposition of penalties.
5. Refund of duty deposited by the appellant.

Analysis:
1. The Central Excise officers found shortages and excesses in various varieties of tiles during their visit to the factory. A panchnama was drawn up on the spot recording these discrepancies, which were later accepted by the representative of the appellant company.

2. The appellants submitted reconciliation statements, breaking down the shortages and recording them in statutory records. These reconciliation statements were accepted during adjudication, leading to a reduction in demands. The matter had been remanded to lower authorities by the Tribunal for reconsideration of the excesses and shortages.

3. The Revenue's case of clandestine removal was primarily based on the shortages observed during the officers' visit. However, the Tribunal noted that shortages alone cannot be conclusive evidence of clandestine activities. Without additional evidence, there was no justification for confirming the demand or imposing penalties on the appellant.

4. Regarding the excess goods, it was explained that they were substandard and the appellants had applied for their destruction. The Revenue did not assert that these excess goods were intended for clandestine removal or were ready for sale. Therefore, the Tribunal found no basis for confiscation or penalty imposition.

5. The second appeal pertained to the refund of duty deposited by the appellant promptly after the shortages were detected. As the first appeal was allowed due to lack of evidence supporting clandestine activities, the deposits made by the appellant were deemed refundable. Consequently, the second appeal for refund was also allowed.

In conclusion, the Tribunal allowed both appeals, providing consequential relief to the appellants by rejecting the Revenue's claims of clandestine removal based solely on shortages and excesses while ordering the refund of duty deposits made by the appellant.