2017 (6) TMI 804 - AT - Central Excise

Shortage of stock - demand of duty - CENVAT credit - assessee was of the view that the stock taking was conducted on the basis of eye estimation - Held that - appellant accepted the shortage of finished products and inputs during stock verification - demand of duty and interest is upheld. Penalty - Held that - there is no material available on record for clandestine removal of the goods - The Hon ble High Courts and the Tribunal in various decisions, held that sufficient evidence is required for clandestine removal of the goods - penalties set aside. Appeal allowed - decided partly in favor of assessee.

Summary

Issues:
1. Central Excise duty demand on shortage of finished goods and inputs.
2. Imposition of penalty on shortage of finished products.
3. Confirmation of CENVAT credit demand on shortage of inputs.
4. Appeal against Order-in-Appeal No.25/Bol/2009 dated 23.07.2009.
5. Validity of stock verification conducted on eye estimation basis.
6. Justification for penalty imposition based on shortage of goods.
7. Requirement of evidence for clandestine removal of goods.

Analysis:
1. The appellant, engaged in manufacturing M.S. Ingots, faced a Central Excise duty demand of ?85,494/- and Education Cess of ?1,710.00 on the shortage of finished goods and inputs. The Adjudicating Authority confirmed the demand along with penalties equal to the duty amount. The appeal against this order was rejected by the Commr. (Appeals).

2. The appellant argued that the stock taking was done based on eye estimation, lacking proper verification, thus challenging the duty and CENVAT credit demands. The Consultant highlighted an affidavit stating the stock taking was on eye estimation basis, and penalties should not be imposed solely on goods shortage, citing relevant case laws.

3. The Revenue, represented by the ld.A.R., supported the lower authorities' findings, emphasizing a significant shortage in finished goods and inputs ranging from 6% to 60%. The Revenue alleged clandestine clearance of goods without duty payment, justifying penalty imposition.

4. Upon hearing both sides and reviewing the records, the Tribunal noted the appellant's acceptance of the shortage during stock verification. The Tribunal found the appellant's submissions lacking substantial basis, dismissing the argument of eye estimation and faulty stock maintenance.

5. Regarding penalty imposition, the Tribunal agreed with the Consultant that the Works Manager's acceptance of shortage without evidence of clandestine removal was insufficient. Citing various judicial precedents, the Tribunal emphasized the necessity of substantial evidence for proving clandestine removal of goods.

6. Consequently, the Tribunal modified the impugned order, upholding the duty demand and interest while setting aside the penalty. The appeal was disposed of with this modification, emphasizing the requirement of concrete evidence for penalty imposition based on shortage allegations.

This detailed analysis of the judgment provides insights into the legal reasoning behind the decisions made by the Tribunal concerning the issues raised in the case.