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TMI Blog2006 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ngalore III Commissioner The Appeal No. 1266/2005 has been filed by the assessee, whereas the Appeal No. 833/2005 has been filed by the Revenue. Appeal no.1266/2005 2. The appellants, M/s. Widia India manufacture Tungsten Carbide, tips/inserts, tipped tools, Tungsten tools, dies, Tungsten Carbide nozzles etc. classifiable under Chapter 82 34 of Central Excise Tariff Act, 1985. The officers of the Directorate General of Central Excise Intelligence conducted certain investigations in the appellants' unit and found out excess and shortage in the stock of finished goods vis-a-vis the appellants' Computers System. A show cause notice dated 25.3.2004 demanding duty amount of Rs. 56,09,485/ -for the years 1999 to 2002 was issued demanding du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As the goods are handled manually at various stages certain errors are unavoidable and system up-gradations are done on an on going basis to bring the system for physical start. Without such a regular up gradation, the SAP system will not allow access to stock and further invoicing. The up-gradations are done by the appellants under two system codes, viz, system code 701 and system code 702. Up under system code 701 is done when the physical quantity in excess when compared to the computer whereas up-gradation under system code 702 is done when the physical quantity of item is found to he lesser as compared to stock of the said item in the computer. (ii) When the DGCEI found out excess and shortage, the appellants explained their system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncies in the stock maintained on their system, the duty demand cannot he made on the shortages. (v) The adjustment entries passed lit the computer system is due to wrong entry made of item having one material code as an item having a different material code. Once the above position is accepted, any netting of excess against shortage has to be done between two different material codes as requested by the appellants and not within same material code as done by department. Even with in the same material code, the stand alone excess quantity or the difference of excess over shortage where excess is more needs to be set off to arrive at the net difference. Reliance is placed on Tribunal decision the case of Cherian P. Varghese vs. CCE, 1992 (5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) RLT 1 (CEGAT-LB) =1999 (108) ELT 361 which has been affirmed by the Apex Court reported in 2002 (142) ELT A279. (ix) When the DGCEI visited the appellant's premises on 12.5.2003, on their insistence, the appellants deposited Rs. 30,00,000/- on 12.05.2003 in their Cenvat account without prejudice to the legal rights of the appellants. The show cause notice has been issued on 25.3.2004 leading to the impugned Order-in-Original dated 27.08.2004 confirming duty demand of Rs. 23,06,508/ -.The appellants have paid the duty much before the date of issue of show cause notice. It is settled law that no penalty and interest is payable, if duty is paid before issue of Show Cause Notice. Reliance is placed on the following cases:- (a) Larger Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for properly. Therefore, the appellants are required to discharge duty on the quantity of finished goods found short as evidence from their own stock taking and their own private statutory records of production which they failed to do. They are liable to pay total duty of Rs. 56,09,485/-. 7. It is seen that the statutory records of production, RG-1 is maintained manually wherein through IDN (Internal Delivery Note) they accounted production and through delivery challans, clearances were accounted. It is not the case of the Revenue that there is a discrepancy between the entries in the statutory record of production, mainly RG1 and the physical stock available on a particular day. It is admitted that a large number of components are bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s system of manual accounting, the Revenue has not found out any discrepancy. What the Revenue has found out is that the appellants had found shortages/excesées of stock during physical verification at the end of year compared to the SAP system figure. This points out only that their own system of accounting has a margin of error. According to the appellants this come to around 2%. To put it in lay man's language, when the production of an item is 100, there is a possibility of the same being shown as either 102 or 98. This is what all we can infer from the Show Cause Notice issued to the appellants. The Adjudicating authority herself has observed that the transaction of the assessee is heavy and voluminous and almost one lakh pieces of ite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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