2017 (3) TMI 768 - AT - Central Excise

Shortage in stock - shortage of MODVAT inputs in respect of which credit was taken, but not utilized and having been disposed off by them without payment of Central Excise duty - natural justice - demand - Held that - the appellants after about 9 years, requested to supply the documents and the submission of the appellant after 10 years of stock verification that weighment was not done correctly, cannot be accepted. Therefore, the demand of duty along with interest is justified. Penalty - Held that - there is reason for shortage. There is no material available on record to show that the shortage quantity was removed clandestinely - mere shortage of goods during stock verification could not construe clandestine removal or manufacture of the goods - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Appeal against Order-in-Original No.79/Denovo/Commr./CE/Kol.II/Adjn/2008-09
2. Shortage of MODVAT inputs, demand of Central Excise duty, interest, and penalty
3. Appeal to Tribunal, setting aside of the Order-in-Original, and remand for fresh adjudication
4. Confirmation of demand, interest, and penalty in denovo Order-in-Original
5. Proper stock verification and weighment dispute
6. Justification of demand of duty and interest
7. Imposition of penalty for shortage of goods during stock verification
8. Legal precedents on shortage of goods and clandestine removal

Analysis:
The appeal was filed against Order-in-Original No.79/Denovo/Commr./CE/Kol.II/Adjn/2008-09, which demanded Central Excise duty, interest, and penalty due to a shortage of MODVAT inputs. The Tribunal set aside the original order and remanded the matter for fresh adjudication. In the denovo Order-in-Original, the demand was confirmed, along with interest and an equal penalty. The appellant argued that proper stock verification was not conducted, highlighting a lack of material supporting the manner of stock taking. The appellant also disputed the weighment process and provided documents to support their case.

The Revenue reiterated the findings of the Adjudicating Authority, emphasizing that the stock taking was conducted in 1999, and the appellant's dispute after almost a decade was not acceptable. The Tribunal noted that the stock verification was conducted jointly by Central Excise Officers and the appellant's representative, with discrepancies acknowledged by the appellant's representative at the time. The Tribunal agreed with the Revenue's argument that the delayed dispute on the stock taking process was not valid, justifying the demand of duty and interest.

Regarding the imposition of penalty, the appellant's representative's statement did not clarify the reason for the shortage, and there was no evidence of clandestine removal. Citing various legal precedents, the Tribunal emphasized that mere shortage during stock verification does not imply clandestine removal. Consequently, the Tribunal modified the impugned order, upholding the demand of duty and interest while setting aside the penalty. The appeal was disposed of accordingly, with the judgment pronounced in open court on 07.03.2017.