2015 (4) TMI 1315 - AT - Central Excise

CENVAT Credit - shortages of raw material/finished goods found short at the time of investigation - HELD THAT - At the time of visit, shortage of finished goods as well as raw material was found. Infact in the case of raw material, shortage is more than 20% and if method of weighment devised by the appellant is taken into consideration then the shortage is 20%. There may be variation from 5% to 10% or like percentage but cannot be such a huge variation in counting the stock on average basis. Therefore, contention of the learned counsel that weighment has been done on average basis is not acceptable. In these circumstances, for the shortage of raw material, appellant is required to reverse the Cenvat credit availed thereof. Finished goods - HELD THAT - The shortages worked out is less than 9% which may be due to average methods suggested by the appellant during the course of physical verification of the goods of 250 MT and as per Panchnama also, the weighment has been on the basis of average weight of bundle of each size. Therefore, variation may occur due to the weighment done on average basis. Penalty on shortage of raw material - HELD THAT - The penalty attributable to shortage of raw material is on high side as appellant has paid the duty at the time of investigation itself. Therefore, penalty is reduced to 25% of the duty confirmed on raw material found short. Appeal disposed off.

Summary

Issues:
Appeal against duty demand on shortages of raw material/finished goods found short at the time of investigation.

Analysis:
The case involved an appeal against an order demanding duty on shortages of raw material and finished goods found during an investigation at the factory. The appellant, a manufacturer of MS bars from MS ingots, faced allegations of denial of Cenvat credit on the raw material found short and duty demand on finished goods found short. The appellant argued that the shortage of finished goods was only around 8.5% and the shortage of raw material was negligible due to variations during stocktaking. The appellant claimed that the weighment method was done on an average basis, making the demands unsustainable.

The opposing argument contended that the goods were physically verified in the presence of the appellants, with shortages of over 20% in raw materials and around 8.5% in finished goods. The method of weighment devised by the appellant was acknowledged, and the impugned order was supported based on these findings. After hearing both parties and considering the submissions, the judge found significant shortages in raw materials, exceeding 20% when the appellant's weighment method was taken into account. However, for finished goods, the shortage was less than 9%, likely due to the average weighment method suggested by the appellant during the physical verification process.

The judge concluded that the weighment done on an average basis was acceptable for finished goods, leading to the setting aside of the duty demand on finished goods. Regarding penalties, it was noted that the penalty for raw material shortage was high, considering the duty was paid at the time of investigation. Therefore, the penalty was reduced to 25% of the duty confirmed on the raw material found short. The appeal was disposed of with these terms, modifying the impugned order accordingly.