2016 (12) TMI 924 - AT - Central Excise

Recovery - shortage of stock - Held that - it is seen that appellant had been procuring scrap from the local market. There is an admission of stock shortage as well as correctness of stock ascertainment by estimate in most of the types of goods manufactured. The circular no.52/79-CX6 dated 26th October 1979 referred to provides for tolerance of shortage in the normal course of ascertainment during annual stock-taking; here, the shortage was not denied at the time of check in the course of investigation. Reliance placed on the decision of the case of Goyal Ispat Ltd v. CESTAT, Chennai 2015 (3) TMI 866 - MADRAS HIGH COURT , where it was held that the non-recording of the correct quantity of goods in the statutory record, viz., RG.1 register maintained by the assessee establishes the case for demand of duty, more so in a case of statement accepting Central Excise violation. Demand sustained - appeal dismissed - decided against appellant.

Summary

Issues:
Recovery of Central Excise duty, interest, and penalty on shortage of stock ascertained during a check carried out by officers.

Analysis:
The case involved M/s India Steel Works Ltd being proceeded against for the recovery of Central Excise duty along with interest and penalty under relevant sections of the Central Excise Act, 1944. The original authority confirmed the recovery and penalty, which was upheld by the first appellate authority, Commissioner of Central Excise (Appeals)-II, Mumbai. The appellant, a manufacturer of steel products, argued that the shortage was minimal compared to total production and should be condoned as per a circular. The appellant also contended that the stock shortage was not subject to weighment but ascertained by eye estimate, citing relevant tribunal decisions supporting their stance.

The Authorized Representative for the respondent argued against the appellant's submissions, stating that the factory-in-charge confirmed the shortage without providing any explanation for possible errors. The Authorized Representative referenced a decision by the Hon'ble High Court of Allahabad and another by the Hon'ble High Court of Madras to support their argument. The Madras High Court decision highlighted the importance of accurate record-keeping and the unretracted statement of the company manager in establishing duty liability.

Upon considering the submissions, the tribunal found that the appellant had admitted to stock shortage and the correctness of stock ascertainment by estimate. The tribunal noted that the circular allowed for tolerance of shortage during annual stock-taking, which was not denied at the time of the investigation. Citing the decision of the Hon'ble High Court of Madras, the tribunal found no flaw in the impugned order and dismissed the appeal.

In conclusion, the tribunal upheld the recovery of Central Excise duty, interest, and penalty on the shortage of stock ascertained during the check carried out by officers, based on the admissions made and the relevant legal provisions and precedents cited during the proceedings.