2015 (11) TMI 1237 - AT - Central Excise

Confiscation of goods - Evasion of duty - Clandestine removal of goods - Held that - Appellant factory was having an average stock of two crore bottles. As per the finding in the Order-in-Original, the shortages found by the Revenue is 11,61,269 bottles and excess worked out as 3,64,682 bottles. Thus, the net shortage is 7,90,387, as worked out by Revenue. For calculation purpose rounding off to 8 lakh bottles, in view of the average stock of 2 crore bottles, the shortage worked out is about 4%. I hold that this is a normal percentage of discrepancy in the nature of business of the appellant. Further, I take notice of the fact that the stock taking had been started at 6.30 pm on 15.2.1990 which was continued throughout the night in poor lighting condition and again the same was continued on 16.2.1990 and was continued in the morning of 17.2.1990. Thus, the mistakes or errors in stock taking cannot be ruled out, and as such, the shortage and/or excess pointed out by the Revenue cannot be held to be perfect. Thus, I hold that the shortages or excess found is the normal variation in stock taking for which no adverse intention is called for. Accordingly, I allow the appeal and set aside the impugned order. - Decided in favour of assessee.

Summary

Issues:
1. Confiscation of excess and shortage of glass bottles
2. Imposition of penalty and confiscation of property
3. Appeal process and remand by High Court
4. Stock taking discrepancies and allegations

Issue 1: Confiscation of excess and shortage of glass bottles
The appellant, a glass bottle manufacturer, appealed against an Order-in-Original confiscating 3,64,682 excess glass bottles and confirming a shortage of 11,61,269 bottles. The duty on shortages was computed, and a penalty was imposed. The appellant contested the discrepancies, citing improper stock taking and clearance of goods after the alleged shortage period. The appellant argued that due to the delicate nature of glass bottles and lack of space, discrepancies were normal.

Issue 2: Imposition of penalty and confiscation of property
The Revenue alleged duty evasion and contravention of Central Excise Rules, proposing recovery of unpaid duty, penalty imposition, and confiscation of goods and property. The appellant refuted the allegations, highlighting difficulties faced during stock taking, lack of response post-fire incident, and denial of fresh stock taking. The Counsel argued that the discrepancies were minor and attributable to the nature of the product.

Issue 3: Appeal process and remand by High Court
The Tribunal initially rejected the appeal, leading the appellant to approach the High Court. The High Court remanded the matter back to the Tribunal due to procedural delays, emphasizing the need for a fair hearing following principles of natural justice. The case was reheard by the Tribunal, considering the appellant's contentions and the Revenue's arguments.

Issue 4: Stock taking discrepancies and allegations
The Tribunal analyzed the stock discrepancies, noting the average stock of two crore bottles and the calculated shortage of approximately 4%. Acknowledging the challenges faced during stock taking, including poor lighting conditions and extended duration, the Tribunal concluded that the discrepancies were within the normal variation for the appellant's business. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant any consequential benefits as per the law.