2018 (12) TMI 164 - AT - Central Excise

Shortage of goods - Wrongful availment of CENVAT Credit - supply of finished excisable goods to 100% EOU under CT-3 certification and export of excisable goods under Letter of Undertaking/under claim of rebate - shortage of stock and finished goods - processing/handling loss - Discrepancy of stock as per form 3CD filed with income tax return - non receipt of material sent for job work beyond the time limit of 180 days - ineligible cenvat credit availed on crucibles sent to job worker - shortage of raw-material observed after verification at job workers premises - penalty under Section 11AC. Shortage of stock and finished goods - Held that - The original authority has found that assessee has not given any satisfactory explanation for having not maintained the statutory record for the goods manufactured by them and further the shortage has not been denied except for processing and handling loss - there is no force in the contention of the appellant as far as shortage of cenvatable inputs and finished goods as on 24.08.2007 is concerned - demand upheld. Discrepancy of stock as per form 3CD filed with income tax return - Held that - On perusal of the closing stock as per the stock accounts available in their 3CD returns, the figure shown as 84009 Kg. Therefore, there was a shortage of raw-material to the extent of 36,482 - demand upheld. Non receipt of material sent for job work beyond the time limit of 180 days - Held that - The learned counsel for the appellant submitted that input sent for processing to job work in some cases were returned back beyond the period of 180 days due to unavoidable reasons. He further submitted that they have produced the record of receipt from the job worker after the stipulated period of 180 days but both the authorities have refused to consider that and therefore if the case is remanded back for examination of this aspect - matter on remand. Ineligible cenvat credit availed on crucibles sent to job worker - Held that - The appellant could not justify from the record that the crucibles were used in the process of manufacture and it becomes waste because no records were maintained. Further the assessee has accepted the non receipt of crucibles sent for job worker for melting aluminium and zinc and therefore the duty liability on this count is also rightly confirmed - demand upheld. Shortage of raw-material observed after verification at job workers premises - Held that - The original authority has found that cenvatable inputs sent for job work was not properly accounted for and verification of accounts conducted showed shortage of material sent for job work at job worker s end. Further the original authority has recorded that Mr. Vijaya Kumar, Operations Director of M/s. Dolphin Die Cast Pvt. Ltd. in his statement dated 25.08.2007 given before the Superintendent of Central Excise has accepted that they should have paid the appropriate duty in respect of this violation - demand upheld. Penalty under Section 11AC - Held that - It is not a case of suppression of material facts with intent to evade payment of duty - imposition of penalty not warranted. Appeal allowed in part as regards penalty is set aside - other demands upheld and part matter on remand as far as verification of raw-materials received from the job worker within 180 days or beyond 180 days is concerned.

Summary

Issues:
1. Contravention of Rule 9(5) of Cenvat Credit Rules, 2004
2. Contravention of Rule 10 of Central Excise Rules, 2002
3. Contravention of Rule 16 of Central Excise Rules, 2002
4. Verification of raw-materials received from job worker
5. Imposition of equal penalty under Section 11AC

Issue 1: Contravention of Rule 9(5) of Cenvat Credit Rules, 2004
The appellant availed cenvat credit on raw materials with shortages, leading to a contravention of Rule 9(5) of the Cenvat Credit Rules, 2004. The appellant voluntarily paid the amounts related to the shortages but contested the discrepancies based on processing losses and handling losses. The original authority upheld the demand, emphasizing the lack of proper record maintenance and suppression of material facts. The appellant's argument regarding normal losses and handling losses was rejected, and the demand was upheld.

Issue 2: Contravention of Rule 10 of Central Excise Rules, 2002
Another discrepancy was identified in the stock of raw materials as per the stock statement and stock accounts, resulting in a shortage. The appellant claimed this shortage was due to processing loss, which was considered normal. However, the original authority found the shortage to be significant and upheld the demand for reversing the cenvat credit amount.

Issue 3: Contravention of Rule 16 of Central Excise Rules, 2002
The non-receipt of processed raw materials and crucibles from job work beyond 180 days led to contravention of Rule 16 of Central Excise Rules, 2002. The appellant's explanations for delays in receipt were not accepted, and the demands related to these discrepancies were confirmed by the authorities.

Issue 4: Verification of raw-materials received from job worker
Discrepancies were found in the stock of raw materials at the job worker's end, leading to a shortage for which cenvat credit was availed. The appellant disputed the verification process at the job worker's premises, but the original authority confirmed the duty demand based on the findings. The appellant's arguments were not accepted, and the demand was upheld.

Issue 5: Imposition of equal penalty under Section 11AC
The imposition of an equal penalty under Section 11AC was challenged by the appellant, arguing that there was no intention to evade duty and discrepancies were promptly rectified upon detection. The appellate authority agreed with the appellant, finding no evidence of intentional evasion and dropped the penalty.

In conclusion, the appeal was partly allowed, with certain demands upheld while the penalty under Section 11AC was dropped. The matter of verifying raw-materials received from the job worker was remanded back to the original authority for further examination.