1994 (2) TMI 146 - AT - Central Excise

Stock taking done in presence of assessee s representative and stock verification report signed by him

Summary

Issues Involved:
1. Alleged excess and shortage of goods (wall tiles and floor tiles).
2. Validity of stock verification process.
3. Justification of penalties and duty imposed.
4. Consideration of damaged stock in the Bonded Store Room (BSR).
5. Applicability of Rule 9(2) of the Central Excise Rules, 1944.

Issue-Wise Detailed Analysis:

1. Alleged Excess and Shortage of Goods:
The case revolves around the alleged excess and shortage of ceramic products (wall tiles and floor tiles) detected by Central Excise Officers during a visit to the appellants' factory. The officers found an excess of 3415 cartons of wall tiles and 1067 cartons of floor tiles, and a shortage of 27826 cartons of wall tiles and 2685 cartons of floor tiles. The excess stock was seized, and a show cause notice was issued proposing confiscation, levy of duty, and imposition of penalties.

2. Validity of Stock Verification Process:
The appellants contested the stock verification process, arguing that the stock was not accurately counted but estimated. They highlighted discrepancies in the panchnamas and argued that damaged stock was not considered. The Department countered that the stock-taking was conducted in the presence of the appellants' representatives, who signed the panchnamas, and thus the results were valid.

3. Justification of Penalties and Duty Imposed:
The adjudicating authority confirmed the duty demand and imposed penalties, citing sufficient evidence of excess and shortage detected during physical verification. The appellants argued that there was no clandestine removal of goods and cited various judgments to support their contention. However, the Tribunal found that the Department had established the charges based on the evidence and upheld the penalties and duty imposed.

4. Consideration of Damaged Stock in the Bonded Store Room (BSR):
The appellants claimed that a large quantity of damaged stock in the BSR was not accounted for, leading to discrepancies. They submitted letters and statements indicating that the damaged stock was higher than estimated by the officers. The Vice President and the Third Member agreed that the appellants' claim regarding the damaged stock (6877 boxes) should be considered, resulting in a modification of the duty demand and penalties.

5. Applicability of Rule 9(2) of the Central Excise Rules, 1944:
The appellants argued that Rule 9(2) was not applicable as there was no proof of clandestine removal. The Tribunal found that the Department had sufficient evidence of excess and shortage, and the appellants failed to provide a satisfactory explanation. Thus, the invocation of Rule 9(2) was justified.

Separate Judgments:
- The Member (Judicial) upheld the adjudicating authority's order, rejecting the appeal.
- The Vice President partially dissented, considering the appellants' claim about the damaged stock and proposing a modification of the duty demand and penalties.
- The Third Member (Technical) agreed with the Vice President, leading to a majority opinion that modified the adjudicating authority's order to account for the damaged stock and reduced the penalty to Rs. 2 lakhs.

Final Order:
In view of the majority opinion, the order of the adjudicating authority was modified to consider the damaged stock as 6877 boxes and reduce the penalty to Rs. 2 lakhs. The rest of the order was confirmed.