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TMI Blog2006 (12) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... private records, which showed that the internal audit branch of the assessee company had noticed shortages in the finished goods manufactured by it during the years 1993-94 to 1996-97 as follows : Shortages in castings Year Iron Castings Aluminium castings 1993-94 71.750 M.Ts. 9.650 M.Ts. 1994-95 126.228 M.Ts. 4.700 M.Ts. 1995-96 198.876 M.Ts. 13.300 M.Ts. l996-97 324.782 M.Ts. 21.195 M.Ts. The summary of shortages was seen in file titled "Annual Accounts 95-96", wherein the Director of the assessee company had remarked that "people should be made accountable for the loss of Rs. 90 lakhs". Officers also conducted detailed enquiries with the senior managers in-charge of production and maintenance of inventory of finished goods. 3. In order to keep account of production of castings, it transpired that the company had maintained a pouring chart where the account of number of moulds filled with molten metal was maintained showing separately the run outs and short runs. A daily production report (DPR) used to be prepared by the mold shop. It contained the scrap quantity and net quantity of castings manufactured. The certified net and good casting particulars were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any included both finished goods and work-in-progress. 4. After going through the statements given by the various personnel, all of whom had confirmed that the daily production report and daily production statements prepared on the basis of the pouring chart was the final and authenticated report which indicated exact and correct figure of production of the castings, the adjudicating authority refused to accept the explanation furnished in reply to the Show Cause Notice that shortages had occurred at various stages of production after the pouring stage. He also referred to the statements of Managers, Foundry Main Land to the effect that defective castings like run outs and short runs had been shown in the remarks column of the pouring chart. He found it unusual that work-in-progress was reckoned in ascertaining the physical stock of castings and found it strange that shortages were computed with reference to such work-in-progress. He, therefore, rejected the explanation and concluded that the assessee had knowingly withheld the information of shortages and had not paid the duty due on such shortages. While confirming a duty of Rs. 45,26,860/- the Commissioner set off an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er be set aside. The appellants cited the following case law in support of their arguments that duty was not demandable for shortage in stock. (i) Orient Cement v. CCE, Hyderabad, 1995 (79) E.L.T. 643 (T) (ii) CCE v. Arun Steel Industries, 1995 (79) E.L.T. 646 (Tri.) (iii) Lalit Chordia v. CCE, Jaipur II, 2002 (150) E.L.T. 584 (Tri.- Del.) (iv) Hindustan Zinc Ltd. v. CCE, Visak, 2004 (172) E.L.T. 244 (Tri.- Bang.) (v) Maruti Udyog Ltd. v. CCE, Delhi, 2004 (173) E.L.T. 382 (Tri.- Del.) (vi) Nutech Polymers Ltd. v. CCE, Jaipur, 2004 (173) E.L.T. 385 (Tri.- Del.) (vii) Bhushan Strips Ltd. v. CCE, Ghaziabad, 2005 (179) E.L.T. 419 (Tri.-Del.) (viii) S.M.R. Cotton Mills (P) Ltd. v. CCE, Salem, 2006 (196) E.L.T. 45 (Tri.- Chen.) Arguing the case of EFL, ld Counsel submitted that the shortage had been ascertained by the appellants themselves and that the Department had not alleged clandestine clearance. The shortage was not real but arose due to errors in accounting of castings at the moulding stage which did not take into account losses due to defects they developed at various stages down the line in the process stream. The manufacturing process involved about seven days and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figures of production of castings......The production data is fed into the computer...........the basis for generating MIS report and the stock movement report by the Industrial Engineering Department and other internal department." He also stated that discrepancy in the stock of castings rarely occurred due to clerical errors. However, such errors could not be a reason for the quantum of discrepancy reported by the internal audit (in the subject case). He ruled out any recording error as the cause for the discrepancy and stated that the loss was for reasons beyond his personal knowledge. 10. Shri V. Jayakumar, Manager, East Land Foundry also confirmed that the daily production report was prepared from the pouring chart by excluding defective castings like run outs and short runs. The daily production report was the final and authenticated report indicating the correct production of castings. Data on that report were fed in the computer. He also confirmed that clerical errors were not the cause for the discrepancy noticed by the internal audit reflected in the shortage summary for the year 93-94 to 96-97. He also admitted that the shortage or loss of stock was due to reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered various case law cited by the ld. Sr. Advocate for the appellants. As rightly submitted by ld. SDR, in the case law cited, shortages ascertained were not accepted as correct on account of the fact that defective/unreliable method of stock-taking was adopted in those cases. In the case of Maruti Udyog Ltd v. CCE [2004 (173) E.L.T. 382 (Tri - Del.)] cited as an exception by the Sr. Advocate, ld. SDR pointed out that the same concerned shortage of inputs determined ignoring the excess. 16. In the NALCO v. CCE, Bhubaneswar-I case (supra) cited by ld. SDR, the Tribunal observed as follows :- "The report further goes on to say that the findings of the Auditor of M/s. R.K. Das & Associates for the year 1992-93, 1993-94 and 1994-95, have duly been accepted by the assessee and the shortage detected are found to have been accordingly incorporated in trial balance in Schedule A-10 and that the physical verification report of M/s. R.K. Das & Associates, has been accepted. 8. Having regard to the fact there were separate bin cards; that the responsible officers of the appellants company were associated with the stock verification; that verification was done in their pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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