2017 (3) TMI 595 - AT - Central Excise

Discrepancy in the stock of finished goods - short payment and non-payment of duty on the removal of the capital goods - shortage of capital goods in the factory - collection of transportation charges from their customers under the separate bill - Held that - As regard the excess stock, we found that total value of the excess goods was ₹ 95,158/- whereas redemption fine was imposed to the tune of ₹ 55,000/- which is on very higher side therefore the redemption fine deserve to be reduced - As regard the demand of Cenvat Credit in respect of capital goods, appellant have paid 50% duty on the removal of capital goods and the same amount was availed by them therefore this issue is contentious that whether the duty against Cenvat credit of 50% should be 100% or 50%. The appellant have not contested demand and paid the same alongwith interest - Regarding the credit on measuring instrument also, the appellant have paid duty alongwith interest without contesting the same - As regard the duty of freight, it is settled in various judgments that merely because the freight amount was not separately shown in the excess invoice, deduction cannot be disallowed. The duty cannot be charged on the freight accordingly demand of ₹ 84,428/- on account of freight is not sustainable - we do not find any malafide intention of the appellant to evade excise duty short payment/ nonpayment of duty appears to be only due to inadvertence or accounting error therefore it is not the fit case for imposition of penalty under Section 11AC - appeal disposed off - decided partly in favor of appellants.

Summary

Issues involved:
- Excise duty on freight separately collected
- Shortage of finished goods
- Duty on removal of capital goods
- Credit availed on measuring instrument
- Penalty under Section 11AC
- Excess stock of finished goods
- Penalties imposed under Rule 26

Excise duty on freight separately collected:
The appellant had collected transportation charges separately from customers. The demand for duty on this collection was contested by the appellant, arguing that the freight was deductible as it was separately invoiced. The Tribunal agreed, citing precedents that support the deduction of freight in excise valuation. The demand of ?84,428 on freight was deemed unsustainable.

Shortage of finished goods:
During a check, discrepancies in finished goods stock were found. The appellant attributed these variations to accounting errors over time. The Tribunal acknowledged the shortage but noted the lack of evidence for clandestine removal. The demand for shortage of goods and the redemption fine for excess goods were reduced, considering the minor quantity discrepancies.

Duty on removal of capital goods and Credit availed on measuring instrument:
The appellant had paid only 50% of the excise duty on the removal of capital goods, leading to a demand. The Tribunal found the issue contentious but noted that the appellant had paid the demanded amount with interest. Similarly, the duty on a measuring instrument was paid by the appellant without contest. These demands were upheld.

Penalty under Section 11AC:
The appellant sought waiver of the penalty under Section 11AC, claiming no suppression of facts. The Tribunal agreed, finding no malafide intent to evade duty. The penalty was set aside due to inadvertence or accounting errors rather than intentional evasion.

Excess stock of finished goods and Penalties imposed under Rule 26:
The Tribunal acknowledged the excess stock of finished goods and reduced the redemption fine imposed. Personal penalties imposed on the Managing Director and an employee were deemed unsustainable due to the lack of malafide intent. The penalties under Rule 26 were set aside.

In conclusion, the Tribunal maintained some demands, such as excise duty on freight and duty on capital goods, while dropping others like penalties under Section 11AC and penalties under Rule 26. The judgment highlighted the importance of intent in determining liability for duty evasion and emphasized the need for evidence in establishing discrepancies in stock.