2015 (2) TMI 517 - AT - Central Excise

Clandestine removal of goods - shortage of finished goods - Reversal of CENVAT Credit - Held that - Average basis counting of the MS Ingots was done and there after it was arrived that physical finished goods available in the factory of the appellant was compared with the statutory records and a shortage of 8-8.5% was found. I find that apart from that, no other corroborative evidence has been ascertained in this matter to allege the clandestine removal of the goods. Although the authorized representative of the appellant has admitted the shortage but he has not admitted any fact that any goods have been removed from the factory without payment of duty. - In that scenario charge of clandestine removal of the case is not sustainable. I further find that in that case, the shortage was found on average basis more than 10 percent but in the case in hand the shortage is less than 10 percent. - The physical verification of the goods has been done on average basis and there is a shortage of only 8-8.5%, further there is no corroborative evidence has been brought on record to allege clandestine removal of the goods. In this scenario, I hold that appellant is not liable to pay duty on the shortage of finished goods found during the course of visit on 07.08.2010. - After going through the CBEC Circular No.877/15/2008 dated 17.11.2008, I find that on such discount given by the supplier on defective goods, the appellant is not required to reverse the Cenvat Credit availed on the inputs - as duty is not payable by the main appellant, therefore the penalties cannot be imposed on both the appellants - Decided in favour of assessee.

Summary

Issues:
- Clandestine removal of goods
- Shortage of finished goods
- Imposition of penalty
- Chargeability of duty on discount given by supplier

Analysis:

Clandestine Removal of Goods:
The case involved an appeal against the confirmation of demand due to alleged clandestine removal of goods based on a shortage of finished goods found during a visit to the factory. The appellant contended that the stock taking was done on an average basis and not physically, hence challenging the allegation of shortage. The appellant argued that there was no corroborative evidence for clandestine removal, citing precedents to support their case. The tribunal found that apart from the shortage, no other evidence supported the allegation of clandestine removal. It was noted that the shortage was less than 10%, and based on precedents, the charge of clandestine removal was deemed unsustainable.

Shortage of Finished Goods:
The shortage of finished goods was found based on average weighment during the visit to the factory. The tribunal observed that the shortage was around 8-8.5% and that no further corroborative evidence was presented to prove clandestine removal. The tribunal distinguished this case from precedents where significant shortages were found, leading to different outcomes. It was held that in the absence of substantial evidence, the appellant was not liable to pay duty on the shortage of finished goods.

Imposition of Penalty:
Regarding the imposition of penalties, the tribunal noted that since duty was not payable by the main appellant due to the lack of evidence supporting clandestine removal, penalties could not be imposed on both the appellants. Precedents were cited to support this decision, emphasizing the importance of evidence and admission in determining liability for penalties.

Chargeability of Duty on Discount:
A demand was confirmed against the appellant for a discount given by the supplier due to defective quality of inputs. The tribunal referred to a CBEC Circular to establish that such discounts did not require the reversal of Cenvat Credit availed on the inputs. Consequently, it was held that duty was not payable by the appellant on the discount, further supporting the decision to set aside the impugned order and allow the appeals.