2017 (7) TMI 123 - AT - Central Excise

Clandestine removal - Propriety of commuting liability to duty on the shortage of goods without offsetting the excess found in stock and the resort to estimation in stock taking - Held that - the impugned order has had to re-work the duty liability that had been arrived at by the original authority - number of contentions of the appellant pertaining to verification of lot numbers with apparent duplication in the inventory and subjecting specific records to ascertainment would establish the correctness of stock in hand had not been examined at the level of the original authority and the first appellate authority - computations require to be re-worked after detailed examination of the records - appeal allowed by way of remand.

Summary

Issues involved: Determination of duty liability on shortage of goods without offsetting excess found in stock, resort to estimation in stock taking, and related consequences.

Analysis:

1. Duty Liability on Shortage of Goods: The case involved appeals by M/s Shree Kailash Textiles Pvt Ltd and Shri Shyam Sundar Kedia against an order-in-appeal regarding the liability to duty on the shortage of goods without offsetting the excess found in stock. The appellants, an independent textile processor, processed grey fabric against materials received under 'annexure' as per Central Excise Rules. The duty liability was supposed to devolve on the supplier of grey fabric. The appellants claimed to maintain proper registers for recording the receipt and removal of grey fabric. However, during a search in February 2004, excess grey fabric and processed fabric were seized, leading to duty payment 'under protest.' The duty liability was determined on the shortfall in stock, and penalties were imposed. The appellants contended that specific lot numbers were assigned based on the source of grey fabric, and cross-usage of raw material and partial processing could lead to inaccuracies in accounting.

2. Estimation in Stock Taking: The appellants argued that the same lot numbers appeared in both the inventory of shortage and excess, suggesting the possibility of reconciliation through correlation with other control documents. They further contended that the duty on goods supplied against 'annexure challan' should not be imposed on them as the liability rested with the suppliers of grey fabric. The impugned order had to re-work the duty liability, and the appellants' contentions regarding verification of lot numbers and duplication in the inventory were not adequately examined by the original and first appellate authorities. The Tribunal noted that the estimate of stock, based on suppositions and presumptions, needed detailed examination in light of the appellants' submissions.

3. Judicial Precedents and Remand: The Authorized Representative relied on legal precedents to argue for the sufficiency of seizure records in establishing clandestine removal. However, the Tribunal found that the computations required re-working after a thorough examination of the records. Consequently, the impugned order was set aside, and the matter was remanded back to the original authority for a detailed consideration of the appellants' submissions regarding the shortage and excess of stock. The appeals were disposed of accordingly, emphasizing the need for a comprehensive review of the issues raised by the appellants.