2016 (3) TMI 612 - AT - Central Excise

Stock of finished goods and raw materials found short at the time of physical verification - appellant assessee is in appeal against confirmation of duty whereas the revenue is in appeal against waiver of penalty allowed by the impugned order - Held that - The manner of stock taking on the date of inspection, have given an approximate figure of the stock and some variation is bound to happen. The question for consideration is whether the variation found is normal calling for no adverse inference, or the variation is abnormal. In view of there being, no instance of any clandestine removal and nor there is found existence of fudging of the records, hold that the discrepancy or variation in the physical stock found, is a normal variation and does not call for any adverse inference. Further find that the appellant assessee also have not made any attempt to explain the variation found at the time of inspection, except alleging that there is discrepancy in the manner of stock taking. Also take note of the fact that the appellant have not protested the deposit of duty pursuant to investigation and maintained silence, till the issue of show cause notice. In this view of the matter reduce the duty confirmed by 50% and further uphold the waiver of penalty by the ld. Commissioner (Appeals). - Decided in favour of assessee in part

Summary

Issues:
Cross appeals against OIA imposing duty and penalty on stock shortage during physical verification.

Analysis:
1. Stock Shortage and Duty Imposition:
The appeals arose from an order imposing duty and penalty on the stock shortage of finished goods and raw materials found during physical verification. The appellant contested the duty imposition, arguing that the stock taking was based on average weights, leading to normal variations. The Commissioner (Appeals) confirmed the duty, citing the appellant's failure to explain the shortage, as per the judgment in Alagappa Cements Pvt. Ltd. vs. CEGAT, Chennai. However, the absence of concrete evidence of clandestine removal led to the deletion of penalty.

2. Allegations and Show Cause Notice:
The show cause notice alleged contravention of various Central Excise Rules due to the shortage of goods. The appellant responded by stating that no clandestine clearance occurred, and the stock taking was based on average weights. They argued that since duty was paid on the alleged shortage before the notice, the proceedings should be dropped. The appellant emphasized that goods were cleared under proper invoices, and no clandestine removal was evident.

3. Adjudication and Appeal:
The order in original confirmed the duty and penalty, which was later appealed by the appellant. The Commissioner (Appeals) upheld the duty but deleted the penalty, emphasizing the lack of evidence for clandestine removal. The appellant's counsel argued that the stock taking method led to normal variations, and no clandestine removal was proven. The Duty was reduced by 50%, and the penalty waiver was upheld due to the absence of concrete evidence supporting the allegations.

4. Conclusion:
The Tribunal considered the stock variation as normal, given the manner of stock taking and absence of evidence of clandestine removal. The appellant's failure to explain the variation and silence after duty payment were noted. Consequently, the duty was reduced by 50%, and the penalty waiver was maintained. The appeal of the appellant was partially allowed, while the revenue's appeal was dismissed.