2016 (12) TMI 1048 - AT - Central Excise

Demand - clandestine removal - Held that - I am satisfied that the stocktaking exercise by Revenue is by way of estimation, and possibility of errors cannot be ruled out. Further, I find that no instance of clandestine removal have been found by the Revenue. Considering the fact that the appellant never raised any dispute as to the method of valuation and or estimation of stock prior to issue of Show Cause Notice, I uphold confirmation of duty but I delete the penalty retained by the ld. Commissioner (Appeals) as there is no contumacious conduct or suppression found by Revenue on the part of appellant - Appeal partly allowed.

Summary

Issues: Stock verification discrepancy, duty evasion allegation, penalty imposition, appeal against penalty reduction.

Analysis:
1. Stock Verification Discrepancy:
The case involved a discrepancy in the physical stock of M.S. Ingots compared to the records maintained by the appellant. During an inspection, the stock of M.S. Ingots was found to be lower than the recorded amount, leading to a difference of 49.685 MT. The discrepancy was valued at &8377; 11,92,440, and the appellant's accountant admitted to the shortage by debiting the apparent duty calculated.

2. Duty Evasion Allegation:
Following the discrepancy in stock, the Revenue issued a Show Cause Notice alleging that the appellant had clandestinely removed finished goods without issuing invoices to evade payment of duty. The notice proposed to recover the duty amounting to &8377; 1,22,821 and imposed a penalty under Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944.

3. Penalty Imposition:
The Show Cause Notice was adjudicated ex-parte as no reply was filed by the appellant. The proposed duty demand was confirmed, and a penalty was imposed. Subsequently, the appellant appealed before the Commissioner (Appeals) who confirmed the duty demand but reduced the penalty to &8377; 1 lakh.

4. Appeal Against Penalty Reduction:
The appellant approached the Tribunal, arguing that the Revenue's stock estimation was based on multiplying the number of ingots by an undisclosed average weight, leading to errors. The appellant denied any clandestine removal of goods and requested the duty demand and penalty to be set aside. The Revenue, on the other hand, supported the impugned order and highlighted the lack of protest from the appellant regarding the stocktaking method.

5. Judgment:
The Tribunal acknowledged that the stocktaking exercise was an estimation with a possibility of errors. No evidence of clandestine removal was found, and the appellant had not disputed the stock valuation method before the Show Cause Notice. Consequently, the duty demand was upheld, but the penalty imposed by the Commissioner (Appeals) was deleted due to the absence of contumacious conduct or suppression by the appellant. The appeal was allowed in part, granting the appellant any consequential benefits as per the law.