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2020 (1) TMI 541 - AT - Central ExciseClandestine removal - shortage of stock - denial of CENVAT Credit - Non-inclusion of sales tax collected under deferment scheme - HELD THAT - This issue has been clarified by the CBEC Circular No.378/II/98-CX dated 12.03.1998 wherein it has been clarified that in respect of deferred payment of sales tax for a particular period and the grant of incentive equivalent to sales tax payable by the unit. Thus the sale tax paid has been clarified to be excluded from the assessable value of the goods. The stock verification report was not conducted by the visiting officer, but simply the statement was asked to be prepared by one of the employee of the appellant namely, Shri Suman Kumar Mishra, Excise Clerk along with Shri Manoj Kumar Pandey and Shri Uday Kumar, all employee of the main appellant (BRIL). As the stock verification report was not done on the physical weighment basis and even not verified by the Central Excise officer as is evident from the stock verification report, its evidentiary value looses its significance, especially in view of the fact that the RG-1 Register and Form-IV Register were incomplete after 31.08.2006. The appellant has taken Cenvat Credit on the basis of prescribed document as per Cenvat Credit Rules and therefore the impugned order is not correct in denying the same. Reliance placed on the various statements of the different persons, which were recorded during the course of investigation - HELD THAT - The Commissioner has not examined the maker of the statements and not permitted the cross-examination of those persons by the main appellant in spite of being specifically requested for. This is in clear violation of statutory provisions as contained in section 9D of Central Excise Act - lot of reliance has been placed on the record of transporter M/s.Rush Cargo Movers. However, this is third party evidence, which cannot be relied without corroborative evidence. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Duty liability and denial of Cenvat credit on the stock shortage of raw material. 2. Non-inclusion of sales tax collected under the deferment scheme in the assessable value of excisable goods. 3. Reliability of the stock verification report. 4. Denial of cross-examination of key witnesses. 5. Imposition of penalties on directors and the company. Detailed Analysis: 1. Duty Liability and Denial of Cenvat Credit: The central issue was the duty liability and denial of Cenvat credit based on the stock shortage of raw materials found during the Central Excise officers' visit. The officers discovered a shortage of PP granules and Master Batch, leading to a demand of ?12,46,746 and disallowance of Cenvat credit amounting to ?36,08,787. The tribunal found that the stock verification report was not conducted by the visiting officers but was prepared by the appellant's employees, which diminished its evidentiary value. The tribunal relied on the decision in D.M. Gears Pvt. Ltd. and Satpushp Steels (P) Ltd., emphasizing that stock shortages determined without physical weighment are not sustainable. 2. Non-Inclusion of Sales Tax in Assessable Value: The appellants argued that they availed the incentive of deferred payment of VAT/Sales Tax under a government scheme and paid the sales tax later. The tribunal noted that the sales tax paid under the deferment scheme should not be included in the assessable value of goods, referencing CBEC Circular No.378/II/98-CX and the decision in Super Syncotex (India) Ltd. This position was upheld, and the tribunal found that the inclusion of deferred sales tax in the assessable value was incorrect. 3. Reliability of the Stock Verification Report: The tribunal found the stock verification report unreliable as it lacked the signature of the Central Excise officers and was prepared by the appellant's employees. The tribunal cited previous rulings that such reports lose their significance without proper verification by authorized officers. The incomplete RG-1 and Form-IV Registers further weakened the report's credibility. 4. Denial of Cross-Examination: The tribunal noted that the appellants were denied the opportunity to cross-examine key witnesses, including the transporter R.K. Mishra, whose statements were heavily relied upon by the department. This denial was seen as a violation of Section 9D of the Central Excise Act, which mandates the examination and cross-examination of witnesses. The tribunal referenced the Supreme Court decision in Andamann Timber Industries, which supports the exclusion of statements not subjected to cross-examination. 5. Imposition of Penalties: Given the tribunal's findings on the main issues, the imposition of penalties on the company and its directors was deemed unsustainable. The tribunal set aside the penalties, aligning with the principle that penalties cannot stand if the main appeal is allowed. Conclusion: The tribunal set aside the impugned order, allowing the appeals. The tribunal emphasized the need for proper verification and adherence to statutory provisions for cross-examination, ultimately finding the department's case unsupported by reliable evidence. The penalties imposed on the company and its directors were also annulled.
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