2017 (3) TMI 507 - AT - Central Excise

Shortage of inputs as well as finished good - demand - Held that - while there is allegation of clandestine clearance on the basis of shortages found, no stock verification has been done nor any evidence of clandestine clearance has been recorded. The entire case of Revenue is based on the mismatch between 3CD returns submitted by the Income Tax authorities and the RG-1 register maintained by the appellant under the Central Excise law - without any evidence of removal of inputs and/or finished goods, merely on the basis of the difference between the excise records and financial records demand cannot be made - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of excise duty and Cenvat Credit on shortage of inputs and finished goods based on discrepancies in stock records.

Analysis:
The case involved the appellants, engaged in manufacturing excisable goods, facing a demand for excise duty and Cenvat Credit due to discrepancies in physical stock compared to records. The department claimed recoverable excise duty on finished goods and Cenvat Credit on inputs based on the difference between RG-1 stock, 3 CD report, and balance sheet. The appellant's appeal was rejected by the Commissioner (Appeals), leading to the current appeal before the Tribunal.

The appellant cited previous Tribunal orders in their favor, where similar demands were dropped. The Revenue argued that the differences in the present case, involving RG-1, balance sheet, and 3 CD, distinguished it from the previous cases. They relied on legal precedents to support their position.

Upon considering the submissions, the Tribunal noted that the demand was solely based on theoretical differences in records without evidence of actual removal of goods. The Tribunal referenced previous orders where demands were dropped due to lack of evidence of clandestine clearance and emphasized the difference in accounting methods between financial accounts and RG-1 records. The Tribunal quoted a previous case to support its decision, highlighting the need for physical verification and evidence of clandestine clearance before imposing demands based on stock discrepancies.

In a separate order dated 30/12/2016, the Tribunal further emphasized that minor variations in stock, without evidence of removal, cannot lead to disallowance of Cenvat Credit. The Tribunal reiterated that discrepancies in stock, without proof of clandestine clearance, do not warrant denial of credit. The Tribunal found the demand unsustainable based on the previous decision in the appellant's case and distinguished the facts from the judgments relied upon by the Revenue.

Ultimately, the Tribunal set aside the impugned order and allowed the appeal based on the lack of evidence supporting the demands for excise duty and Cenvat Credit due to discrepancies in stock records. The Tribunal's decision was guided by the need for physical verification and evidence of clandestine clearance before imposing such demands.