2007 (8) TMI 199 - AT - Central Excise

Absence of evidence of clandestine removal Mere shortage of finished goods, that also based on eye estimation the allegation of clandestine removal not sustainable Confiscation set aside Appellant had availed credit malaafide Even if inadmissible credit has been reversed, penalty is imposable

Summary

Issues:
1. Confirmation of demand of duty on finished goods found short during stock taking.
2. Allegation of clandestine removal of finished goods.
3. Confiscation of excess inputs.
4. Admissibility of Cenvat credit on LDO and capital goods.
5. Imposition of penalty on the appellant.

Analysis:

Issue 1:
The appellant contested the demand of duty on finished goods found short during stock taking. The appellant argued that the stock taking process was flawed as it was based on eye estimation without recording actual weights, making the conclusion unreliable. The Tribunal found that the stock taking was unscientific and unreliable, citing a previous case where it was held that unless shortage is demonstrated through actual weighment, allegations of illicit removal cannot be sustained. The Tribunal concluded that the allegations of shortage were incorrect due to lack of conclusive evidence.

Issue 2:
Regarding the allegation of clandestine removal of finished goods, the Tribunal found that the mere shortage of finished goods based on eye estimation was insufficient to prove clandestine removal. The Tribunal noted that the partner of the appellant had stated that the person present during stock taking was a new employee, casting doubt on the accuracy of the process. Without concrete evidence of clandestine removal, the Tribunal set aside the allegation.

Issue 3:
The confiscation of excess inputs was also challenged by the appellant based on the flawed stock taking process. The Tribunal agreed that the eye estimation method used for stock taking was unreliable, leading to incorrect conclusions. As a result, the Tribunal set aside the confiscation of excess inputs and the penalty imposed on the appellant for this issue.

Issue 4:
The appellant did not contest the inadmissible Cenvat credit on LDO and capital goods. The Tribunal upheld the confirmation of demand for the inadmissible credit on LDO but reduced the penalty imposed on the appellant for violating Central Excise Rules.

Issue 5:
Regarding the penalty imposed on the appellant, the Tribunal acknowledged that the appellant had reversed the inadmissible credits promptly upon notification. However, the Tribunal found a violation of Central Excise Rules and reduced the penalty from the initial amount to a lower sum.

In conclusion, the Tribunal modified the impugned order by setting aside the allegations of clandestine removal and confiscation of excess inputs, upholding the demand for inadmissible credit on LDO, and reducing the penalty imposed on the appellant.