2015 (10) TMI 1914 - AT - Central Excise

Duty demand - Shortage of goods - Clandestine removal of goods - Held that - Entire case of the Revenue is based upon the alleged shortages detected at the time of their visit. Even if the Revenue s contention that there was proper physical verification as against the appellants claim to the contrary, is accepted even then, I find that shortages in MS scrap is around 4.848 MT as against stock of 227.900 MT and shortage in CTD bars is to the tune of 33.900 MT as against the stock of 194.400 MT. Keeping in view the nature of goods, such shortages are minor and are bound to happen in an industry of the like kind. Apart from the shortages there is no evidence to show that goods in question have been cleared clandestinely. The Tribunal has, in a number of cases, has held that shortages alone cannot lead to the finding of clandestine removal. One such reference can be made to the Tribunal s decision in the case of In on Creation v. CCE, Thane 2012 (10) TMI 2 - CESTAT, MUMBAI . As such, there is no justification for confirmation of demand or for imposition of penalty upon the appellant on the said count. - here is virtually no evidence to reflect that the appellant did not enter their goods on their statutory records with any mala fide intention. Similarly, shortage of scrap would not call for any confirmation of demand against them. As such, I find no justification for confirmation of the same. - Decided in favour of assessee.

Summary

Issues:
1. Shortages detected in the quantum of raw materials and excesses found in final products during a factory visit.
2. Initiation of proceedings for confirmation of demand, penalties, and confiscation of goods.
3. Alleged shortages and excesses leading to demand confirmation and penalties.
4. Lack of evidence supporting clandestine removal or mala fide intentions.
5. Tribunal's decision on shortages and excess goods.

Analysis:
1. The judgment addresses the issue of shortages in raw materials and excesses in final products discovered during a factory visit. The appellant, engaged in manufacturing, faced discrepancies in the stock of MS scrap, CTD bars, and MS ingots. The total duty involved in shortages was Rs. 1,18,166, while the excess final products were valued at Rs. 9,74,915.

2. Proceedings were initiated against the appellant for confirmation of demand, penalties, and confiscation of goods based on the discrepancies found. The original adjudicating authority confirmed the demand, imposed penalties, and allowed redemption of confiscated goods on payment of a fine. The Commissioner (Appeals) upheld this order upon appeal.

3. The judgment scrutinizes the alleged shortages and excesses, emphasizing that minor shortages in raw materials are common in the industry. Despite the Revenue's contentions and physical verifications, the Tribunal found the shortages to be insignificant and not indicative of clandestine removal. Citing precedents, the Tribunal ruled that shortages alone do not justify demand confirmation or penalties.

4. Regarding the excess found goods, the Tribunal noted a discrepancy but found no evidence of mala fide intentions or failure to record goods properly. The judgment emphasizes that a shortage of scrap does not warrant demand confirmation. Consequently, the Tribunal found no justification for confirming the demand based on excess goods.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellant. The decision highlights the lack of evidence supporting the Revenue's claims and the importance of considering industry norms and precedents in such cases.