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2023 (9) TMI 563 - AT - Central ExciseClandestine Removal - payment of royalty to M/s KIL over and above what they have declared to the Department - shortage of 72 MT of MS Bars. The appellant has paid royalty to M/s KIL over and above what they have declared to the Department - HELD THAT - Similar case came up before this Tribunal in the case of M/S GIRIRAJ IROSTEEL COMPANY PVT. LTD., SHRI SUNIL KUMAR AGARWAL, SHRI PURUSHOTTAM RATHI VERSUS COMMISSIONER OF CENTRAL EXCISE 2019 (12) TMI 542 - CESTAT ALLAHABAD , wherein the facts of the case held that Since Central Excise duty is on manufacture and manufacture is not established, therefore, there is no basis for demand of Central Excise duty to the tune of ₹ 5,58,89,762/- - As in this case, the demand of duty is sought to be confirmed against the appellants on the basis of documents recovered from M/s KIL wherein it has been shown that they have received royalty over and above as declared by the appellants to the Department. Admittedly, no efforts were made by the Revenue regarding production and sale of the goods, realization of sale proceeds, identification of customers and what is the production capacity of the appellants. In the absence of of those evidences, merely alleging that franchisee has received over and above as declared by the appellants, the charge of clandestine removal is not sustainable as held by this Tribunal in the case of Giriraj Irosteel Company Private Limited. The demand alleging clandestine removal on the basis of payment of royalty recorded in the books of M/s KIL, is not sustainable. Certain shortage of 72 MT of MS Bars was found on 01.04.2013 at the time of visit - HELD THAT - The shortage found during the course of stock taking on 01.04.2013, we find that more than 32000 bundles were lying in stock and on the basis of one bundle of each size, it is taken the basis for weightment, but it is not coming out from the facts that how more than 32000 bundles were counted? These are only an eye estimation as no counting has been placed on record by the Revenue to allege the shortage of 72 MT in stock of more than 1700 MT. Therefore, as held by this Tribunal in the case of M/S SADA SHIV STEEL MILLS, M/S SADA SHIV CASTINGS LTD., M/S SADA SHIV ISPAT LTD, SHRI SUNNY GARG, SHRI KEWAL GARG, M/S RAGHAV ENTERPRISES (PROP. SURESH AGARWAL) VERSUS CCE, CHANDIGARH-I 2016 (10) TMI 951 - CESTAT CHANDIGARH , wherein this Tribunal has observed Admittedly, no corroborative evidence has been produced by the Revenue in support of their claim, therefore, we hold that demand of duty on shortage of raw material/finished goods against M/s. SSCL is not sustainable. The said order was affirmed by the Hon ble High Court of Punjab Haryana in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, CHANDIGARH-II VERSUS KEWAL GARG 2019 (2) TMI 1624 - PUNJAB HARYANA HIGH COURT , wherein it has been held that on the basis of average, there is no shortage of stock found during the course of search. We hold that the Revenue has failed to establish the shortage of 72 MT on what method of weighment was adopted except weighing one bundle of each size and without recording how more than 320000 bundles were counted. Therefore, without counting the stock and on the basis of average of one bundle each size, such is a huge quantity, cannot be held any shortage. Thus, the benefit of doubt goes in favour of the appellants. Accordingly, on the basis of method adopted of shortage on 01.04.2013 of MS Bars, the allegation of shortage is not sustainable - the demand raised on account of shortage of goods is not sustainable. The whole of the demand confirmed against the appellants are set aside - As the demand of duty is not sustainable, therefore, no penalties are imposable on the appellants - Appeal allowed.
Issues Involved:
1. Payment of royalty over and above what was declared to the Department. 2. Shortage of 72 MT of MS Bars found during stock taking. Summary: Issue (a): Payment of royalty over and above what was declared to the Department The appellants were accused of paying royalty to M/s Kamdhenu Ispat Limited (KIL) over and above what was declared to the Department, based on documents recovered from KIL. The Tribunal referenced a similar case, Giriraj Irosteel Company Private Limited Vs. Commissioner of Central Excise, where it was held that demands cannot be confirmed solely on the basis of presumptions and assumptions without evidence of excess production, raw material procurement, dispatch details, customer identification, and power consumption. The Tribunal concluded that the demand alleging clandestine removal on the basis of payment of royalty recorded in the books of KIL is not sustainable. Issue (b): Shortage of 72 MT of MS Bars found during stock taking The Tribunal found that the method used to ascertain the shortage was flawed. The stock was estimated based on the weight of one bundle of each size, without proper counting of over 32,000 bundles. This method was deemed unreliable, similar to the precedent set in Sada Shiv Steel Mills Vs. CCE, Chandigarh I, where it was held that weighment done on an average basis without corroborative evidence of clearance of finished goods without payment of duty is not sustainable. Consequently, the allegation of shortage was not upheld. Conclusion: The Tribunal set aside the entire demand confirmed against the appellants, stating that the allegations of clandestine removal and shortage of goods were not substantiated. As the demand of duty was found to be unsustainable, no penalties were imposed on the appellants. The appeals were allowed with consequential relief.
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