2018 (7) TMI 1195 - AT - Central Excise

Clandestine Removal - stock verification based on estimation - photocopies of invoices - Whether the appellant is liable to pay duty for the variation of less than 10% found during the course of physical verification of stock? - Held that - The stock taking have been done by way of estimation and/or eye estimation. Thus there is bound to be error and/or variation in such method of stock taking - the variation in the stock is less than 10% which calls for no adverse inference - duty demand do not sustain. Photocopies of invoices - whether the appellant can be charged with duty with respect to photocopies of some invoices in possession of the Revenue purportedly issued by the appellant? - Held that - There is no whisper either in the Panchnama or in the statement recorded on the date of Panchnama as to the source of possession of such photocopies of invoices - Only based on the duty deposited by the appellant in the course of investigation it appears the Revenue have taken adverse view as admission on the part of the appellant with respect to the allegation of clandestine removal. Accordingly the allegation of clandestine removal is not proved and the court below have erred in drawing adverse inference on the fact that the appellant have deposited the duty during the course of investigation - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay duty for less than 10% variation in stock during physical verification.
2. Duty chargeability for photocopies of invoices purportedly issued by the appellant.

Issue 1: Liability for less than 10% variation in stock:
The appeal revolved around determining whether the appellant should be held liable to pay duty for a less than 10% variation found during the physical verification of stock. The appellant, a manufacturer of Rolled Products of Iron and Steel, was suspected of maintaining double sets of invoices to evade duty. During a surprise inspection, a discrepancy of 14,773 kg was found in the stock. The proprietor denied involvement in any clandestine activities and accepted the shortage to avoid litigation. The Revenue proposed demands amounting to Central Excise Duty and penalties, which were confirmed in the Show Cause Notice (SCN) adjudication. However, the Tribunal found that the stock verification was done through estimation, leading to bound errors and variations. As the variation was less than 10%, no adverse inference was warranted. Consequently, the duty demanded was deleted.

Issue 2: Duty chargeability for photocopies of invoices:
The second issue pertained to the duty chargeability concerning photocopies of invoices allegedly issued by the appellant. The Revenue proposed demands based on these photocopies, suspecting clandestine clearance of goods. However, the proprietor denied issuing these invoices, and the consignees named in them confirmed never purchasing the goods. The Tribunal noted the absence of any evidence linking the appellant to the photocopies in the Panchnama or statements. Additionally, the Revenue's adverse view based on the duty deposited by the appellant during the investigation was deemed unfounded. Consequently, the allegations of clandestine removal were not proven, and the demands related to these photocopies were set aside. The appellant was also deemed eligible for the Small Scale Industry (SSI) Exemption for the relevant period.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits as per the law. The judgment highlighted the importance of evidence and proper verification in establishing liability for duty payments, ultimately ruling in favor of the appellant based on the lack of substantial proof supporting the Revenue's claims.