2015 (10) TMI 1659 - AT - Central Excise

Duty demand - Availment of CENVAT Credit - Credit on building material that is Joist Angle which was used in fabrication of building material - On being pointed out, assessee reversed the credit - Held that - In this case factory was visited on 29.07.2009 at 11.05 hrs and panchnama was drawn. It is also a fact on record that proceedings were concluded at 11.30 hrs on 29.07.2009. That is whole of the proceedings were completed within a span of 25 minutes i.e. drawing of the panchnama and physical verification of stock of almost 2000 Metric tonnes which is not possible by all the means. Therefore, stock taking is not proper and shortage found are only on the estimate basis which is not acceptable. In these circumstances, shortage found at the time of physical verification on 29.07.2009 is not sustainable. Accordingly, demand on this account is set aside. Consequently, interest and penalty is not imposable. - inadmissible Cenvat Credit on Joist Angle the appellant has already reversed the Cenvat Credit and not disputed the same. Therefore, demand on that account has been confirmed along with interest. As the appellant has immediately reversed on pointing out by the revenue at the time of investigation. I hold that penalty is not imposable - Decided partly in favour of assessee.

Summary

Issues:
- Appeal against order demanding duty, interest, and penalty
- Shortage of finished goods during physical verification
- Denial of Cenvat Credit on building material
- Sustainability of demand based on stock verification
- Imposition of interest and penalty

Analysis:
The appellant, engaged in manufacturing MS Bar, appealed against an order demanding duty, interest, and penalty due to a shortage of finished goods discovered during a physical stock verification. The appellant's accountant failed to provide a valid explanation for the shortage, leading to the initiation of proceedings and the denial of Cenvat Credit on building material used in fabrication. Although the appellant reversed the Cenvat Credit and paid the duty on finished goods, the demand was confirmed by lower authorities.

The appellant argued that the stock verification conducted within 25 minutes was insufficient to accurately assess the entire stock, citing a Tribunal case precedent to support the claim that estimation assumptions are inadmissible. They contended that considering the production on the day of verification would reduce the shortage significantly, making the demand unsustainable. Additionally, the appellant promptly reversed the wrongly availed Cenvat Credit on Joist Angles upon notification, requesting the penalty to be dropped.

On the contrary, the Revenue reiterated the findings of the impugned order, emphasizing that the stock verification was witnessed and undisputed by the appellant at the time. However, the Tribunal found the stock taking process within 25 minutes to be inadequate for a thorough assessment of nearly 2000 Metric tonnes, rendering the shortage findings based on estimation unreliable. Consequently, the demand related to the shortage was set aside, leading to the non-imposition of interest and penalty.

Regarding the inadmissible Cenvat Credit on Joist Angles, the appellant had already reversed the credit without contesting the issue, leading to the confirmation of the demand with interest. However, since the appellant promptly rectified the error upon revenue notification, the Tribunal held that the penalty was unwarranted and subsequently dropped it. Therefore, the appeal was partly allowed, with the demand related to the shortage being set aside, and the penalty for the Cenvat Credit issue being waived.