2017 (10) TMI 117 - AT - Central Excise

Shortage in stock - case of appellant is that the stock taking done on the basis of eye estimation and is not sustainable - Held that - the method through which said stock taking was conducted has not been indicated in the said Panchnama dated 28.02.2013. Therefore, the contention of the appellant that there was no stock taking carried out but it was only the eye estimation through inspection that 106 MT of Billets were stated to be short cannot be proved to be wrong on the basis of record - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Validity of stock taking method
- Imposition of penalty under Central Excise Rule, 2002

Validity of stock taking method:
The case involved two appeals arising from a common impugned Order-in-Appeal passed by the Commissioner (Appeals), Central Excise Meerut-II at Noida. The officers of Central Excise visited the manufacturing premises of the appellant and conducted an inspection, resulting in a Panchnama indicating a shortage of 106 MT of Billets during stock taking on 28.02.2013. A show cause notice was issued demanding Cenvat Credit and proposing a personal penalty. The Order-in-Original confirmed the demand and imposed penalties, which were challenged in the appeals. The appellant argued that the stock taking was carried out by eye estimation and was not sustainable. However, the Commissioner (Appeals) upheld the original order. Upon review, the Tribunal found that the method of stock taking was not clearly indicated in the Panchnama, leading to the conclusion that the show cause notice was not sustainable. Consequently, the impugned Order-in-Appeal and the Order-in-Original did not survive in law, and both appeals were allowed with the appellant entitled to consequential relief.

Imposition of penalty under Central Excise Rule, 2002:
The appellant contended that the stock taking was not conducted but was based on eye estimation, with no clear indication of the method used in the Panchnama. The Managing Director, as per the show cause notice, expressed satisfaction with the stock taking method. However, upon considering the arguments and reviewing the Panchnama, the Tribunal found that the method of stock taking was not specified, leading to the conclusion that the show cause notice was unsustainable. As a result, the impugned Order-in-Appeal and the Order-in-Original were set aside, and the appeals were allowed in favor of the appellant, who was entitled to consequential relief as per law.