2013 (11) TMI 990 - AT - Central Excise

Confirmation of Cevat credit on shortage of goods i.e; Ferro Silicon Lumps/Ferro Manganese correct or not - The appellant s plea there was no shortage of the goods as the same were available in the factory at the time of stock checking, is difficult to accept, in the background of fact that they have paid the duty involved on the goods found short - If the goods actually were available in the factory, any normal businessman would have pointed this out the very next day and he would not have waited for more than 2 weeks - the appellant s stand under their letter dated 28/12/07 that there was no shortage of the goods is only an afterthought and that this is a case where the Cenvat credit had been taken without actually receiving the goods, as has been clearly stated by Shri Mahesh Kumar Sharma in his statement. If the shortage was due to inability of Shri Mahesh Kumar Sharma to locate the goods, he would not have given such a categorical statement that no goods had been received - This statement of Shri Sharma had not been retracted by him - Just because the suppliers who had issued the invoices have claimed to have supplied the goods and have claimed to have received the payment, it does not nullify the fact that at the time of stock taking on 12/12/07, the goods covered under these invoices were not available and even for more than 2 weeks after the detection of the shortage, the appellant were not able to produce the goods supposed to have been received under these invoices - there is no infirmity in the order upholding the Cenvat credit demand alongwith interest and imposition of penalty of equal amount. Penalty under Rule 25(1)(a) and (d) Held that - The penalty imposed during the period when this fraudulent Cenvat credit had been taken to which the appellant were not entitled, the excisable goods had been cleared by payment of duty through Cenvat credit while there was no sufficient Cenvat credit balance and, as such, those clearances would have to be treated clearances having been made without payment of duty the penalty has been correctly imposed Decided against Assessee.

Summary

Issues Involved:
1. Shortage of raw material during stock verification.
2. Availing Cenvat credit based on invoices without actual receipt of goods.
3. Imposition of penalties under Cenvat Credit Rules and Central Excise Rules.
4. Allegation of clearance of goods without payment of duty.
5. Violation of natural justice due to denial of cross-examination.

Issue 1: Shortage of Raw Material
The case involved a discrepancy in the stock of Ferro Silicon Lumps/Ferro Manganese during a Central Excise officers' visit to the appellant's factory. The stock was supposed to be 113.89 M.T. as per records, but only 8.88 M.T. was found, resulting in a shortage of 105.01 M.T. The authorized signatory admitted the shortage, attributing it to invoices from suppliers where no goods were actually received. The appellant later claimed the missing stock was available in the factory, but the delay in locating it raised doubts. The Tribunal held that the appellant's post-verification claim of no shortage was an afterthought, as they had already paid duty on the missing goods. The Tribunal found no merit in the appellant's defense and upheld the Cenvat credit demand and penalties.

Issue 2: Availing Cenvat Credit based on Invoices
The appellant had availed Cenvat credit based on invoices for the missing raw material without actually receiving the goods. The authorized signatory acknowledged this mistake and agreed to repay the wrongly taken credit. The Tribunal concluded that the appellant's actions amounted to availing credit under bogus invoices, as confirmed by the signatory's statement. Despite claims from suppliers of supplying the goods and receiving payment, the Tribunal emphasized the lack of physical availability of goods during verification, leading to the dismissal of the appellant's defense.

Issue 3: Imposition of Penalties
The Jurisdictional Joint Commissioner had imposed penalties under various rules for the Cenvat credit demand and clearance of goods without sufficient credit balance. The Commissioner (Appeals) upheld these penalties, citing the appellant's wrongful actions. The Tribunal supported the penalties, stating that the fraudulent credit availing and clearance without adequate credit balance warranted the imposed penalties under the applicable rules.

Issue 4: Allegation of Clearance without Payment of Duty
The penalty of Rs. 2,00,000 was imposed for clearing goods by payment of duty through Cenvat credit without having a sufficient balance. The Tribunal deemed this penalty appropriate given the nature of the contravention, where excisable goods were cleared without proper duty payment. The penalty was upheld as justified under the relevant rules.

Issue 5: Violation of Natural Justice
The appellant raised concerns about the denial of cross-examination, citing a judgment on natural justice. The Tribunal, however, found no necessity for cross-examination in this case based on the circumstances. The issue was addressed, and the Tribunal proceeded with the judgment without considering the denial of cross-examination as a violation of natural justice.

In conclusion, the Tribunal dismissed the appeal, upholding the Cenvat credit demand, penalties, and the findings related to the shortage of raw material and wrongful credit availing. The judgment emphasized the importance of physical verification and adherence to excise regulations in availing credits and clearing goods to maintain the integrity of the excise system.