2018 (7) TMI 1046 - AT - Central Excise

Clandestine removal - shortage of stock and finished goods - no method of stock taking recorded in the panchnama - Held that - The panchnama does not indicate, as to how the stock taking was conducted and also there is no calculation sheet available with the panchnama. Therefore, the shortage of finished goods and pet coke shown in the panchnama are not substantiated - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenging Order-in-Appeal No. NOI-EXCUS-002-APP-1598-17-18 dated 10/01/2018 passed by Commissioner of Central Goods & Service Tax (Appeals), Noida based on shortage of finished goods and Cenvat credit disallowance.

Analysis:
The case involved two appeals arising from an Order-in-Appeal dated 10/01/2018 passed by the Commissioner of Central Goods & Service Tax (Appeals), Noida. The appellants, engaged in paper manufacturing and availing Cenvat credit, were issued a show cause notice based on a panchnama conducted on 29.03.2014, revealing a shortage of finished goods and Cenvatable input. The Order-in-Original dated 05.02.2016 confirmed the demand for Central Excise duty and disallowance of Cenvat credit, imposing penalties on the manufacturer and director. The appeals were filed challenging this order. The Commissioner (Appeals) upheld the Order-in-Original, leading to the appellants approaching the Tribunal.

During the hearing, the appellant's counsel argued that the panchnama lacked a proper method of stock taking, no admission of clandestine removal, and no method of stock taking for Pet Coke. Reference was made to a Tribunal's Final Order in a similar case highlighting deficiencies in the panchnama. The Revenue's representative supported the impugned Order-in-Appeal.

Upon review, the Tribunal found the panchnama to be defective as it did not specify the method of stock taking or include a calculation sheet, rendering the shortages unsubstantiated. Given the reliance on the flawed panchnama for the entire case, the Tribunal deemed the Order-in-Appeal unsustainable. Consequently, both appeals were allowed, granting the appellants consequential relief as per law.