2017 (1) TMI 1224 - AT - Central Excise

Shortage of stock - Clandestine removal - a quantity of 1410.200 MT was physically verified against a recorded balance of 2813.903 MT. Central Excise authorities thus found a shortage of 1403.703 MT of scrap in the factory premises - the reasons for shortage were due to the fact that the material had not been received in their factory or due to the fact that the appellant had been showing less burning loss during the previous years? Held that - The appellants have referred to the retraction made by him on 27.09.2011. From the said retraction, it is seen that the retraction has been filed before the Commissioner of Central Excise, Chandigarh. Further, the appellants have not alleged that there was any kind of coercion or force or pressure or duress while recording the statement. Without giving any reason, they simply said that the statement was not voluntary. I find that in the absence of any allegation or evidence of force or coercion, or pressure or duress, the retraction carries no weight and is an afterthought particularly since they are admitting that they were actively associated with the officers in the entire verification exercise. I also find that the retraction has not been addressed to the investigation officer who recorded the statement. The appellant have also argued that no panchnama was drawn on the spot. I find that the weighment exercise was done in the presence of the Director, with his active assistance. The Director has certified the correctness of the weighment exercise and subsequently admitted the shortage of scrap. Therefore, he cant take this plea at this stage. No infirmity in the impugned order - appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Legitimacy of the stock verification process.
2. Validity of the appellant's retraction of statements.
3. Justification of the burning loss percentage.
4. Applicability of penalties and recovery of duties based on alleged shortages and paper transactions.

Detailed Analysis:

1. Legitimacy of the Stock Verification Process:

The factory premises were inspected by Central Excise officers, who found discrepancies between the recorded stock and the actual stock of raw materials. The computerized statement found on the Director's table indicated a stock of 1400 MT of scrap, whereas the Form IV register showed 2813.903 MT. The physical verification conducted in the presence of the Director revealed a shortage of 1403.703 MT of scrap. The Director actively participated in the verification process and confirmed the correctness of the weighment slips. The Tribunal found no merit in the appellant's argument that it was inconceivable to load 96 trucks in 8 hours, as the Director was satisfied with the manner of verification.

2. Validity of the Appellant's Retraction of Statements:

The Director retracted his statement on 27.09.2011, claiming that the shortage was due to showing less burning loss in previous years. However, the Tribunal noted that the retraction was not addressed to the investigation officer but to the Commissioner, making it a representation or complaint rather than a valid retraction. The Tribunal emphasized that there was no evidence of coercion or duress during the recording of the initial statement, making the retraction an afterthought. The statement recorded under Section 14 of the Central Excise Act, 1944, was deemed admissible evidence, supported by the Supreme Court judgment in CCE Vs. Kalvert Foods India Pvt. Ltd.

3. Justification of the Burning Loss Percentage:

The appellant claimed a burning loss of 56.20% for September 2011, which was significantly higher than the average burning loss of 5% to 7.08% recorded from January 2009 to August 2011. The Tribunal found this sudden surge in burning loss to be a deliberate ploy to justify the shortage of scrap detected. The appellant's reliance on case laws and RTI information indicating a burning loss of 8% to 11% was dismissed, as the high burning loss in September 2011 was not normal and seemed to be an attempt to adjust the detected shortage.

4. Applicability of Penalties and Recovery of Duties:

The Department issued a Show Cause Notice, resulting in the confirmation of a demand of ?35,51,734/- along with interest and penalties. The Tribunal upheld the order of the Adjudicating Authority and the Commissioner (Appeals), finding no infirmity in the process. The Director's active participation in the verification process and subsequent admission of the shortage, along with the absence of any valid retraction, justified the penalties imposed. The Tribunal dismissed the appellant's reliance on various case laws, as the facts of those cases were different from the present case. The Tribunal also noted that the statements of the Director were sufficient corroborative evidence to prove clandestine removal, as per the judgment in Chowby Sugandhit Tambaku Co. Vs. CCE.

Conclusion:

The Tribunal dismissed the appeals filed by the appellants, upholding the order of the Commissioner (Appeals) and confirming the demand, interest, and penalties imposed. The Tribunal found the stock verification process legitimate, the retraction of statements invalid, the burning loss percentage unjustified, and the penalties and recovery of duties applicable based on the evidence presented.