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TMI Blog2017 (11) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... of estimation and in such manner of stocktaking - the variation of 2% to 3%, as worked out by the Revenue is a normal variation not calling for any adverse inference. The whole show cause notice is untenable and cannot be upheld - appeal allowed - decided in favor of appellant. - E/874/2010-EX [SM] - A/71309/2017-SM[BR] - Dated:- 16-6-2017 - Mr. Anil Choudhary, Member (Judicial) Shri Bipin Garg (Advocate) Ms. Stuti Saggi (Advocate) for Appellant Shri Gyanendra Tripathi, AC(AR) Shri Pawan Kumar Singh, Supdt. (AR) for Respondent ORDER Per: Anil Choudhary The issue in this appeal filed by the appellant-assessee is whether under the facts and circumstances, the issue of show cause notice is in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the aforesaid services. It appeared that the said Intellectual Property Service received was taxable on reverse charge basis under the provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1) (d)(iv) of the Service Tax Rules, 1994. The appellant deposited the tax amount as calculated at ₹ 89,985/- along with ₹ 15,751/- as well as interest vide TR6 Challan dated 26 November, 2007 and Challan dated 21 November, 2007 and gave intimation to the Revenue. 4. Further, the inspection team conducted a stock verification in respect of MS Ingots/Billets, the raw materials, and the finished products M.S. Bars in presence of the representative of the appellant, namely Shiv Kumar Sharma, Cashier/Accountant and Nirankar Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained by them, it was observed that consolidated entry for MS Ingots and Billets were made in the raw material register and a stock of 3084.748 MT was shown as closing balance of 15 November, 2007, whereas on physical stock taking, the stock of the above goods, as ascertained was worked out at 3340.044 MT. Therefore, there appear to be shortage of 255.296 MT (3340.044-3084.748) in the stock of MS Ingots/Billets. On being asked about the reason for the said shortage, Shri V.K. Tyagi, Manager (Taxation), Authorized Signatory of the appellant in his statement recorded on 15 November, 2007 attributed the shortage in the stock to the possible variation in the stock as it was taken on the basis of average weight of ingots/billets taken on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Taxation) explained that it is not possible for them to weigh the stock of finished products (being in not condition) after production and the weighment of the same is done only at the time of clearance. Statement of Shri K.J. Dhawan in charge of finished goods in the factory was also recorded who stated that he is looking after the stock of finished goods and working with the unit since 2004 and as per wide experience in the industry, he stated that he takes physical verification of the stock of finished goods on daily basis. On the basis of production data, dispatch data the estimation of finished goods stock is done on the basis of his experience in the field. He further stated that the stocktaking is done by way of estimation on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the demand was raised for the Cenvat Credit amounting to ₹ 3,54,039 with proposal to appropriate the matching amount already reversed along with further proposal to impose penalty. Similarly demand was proposed for shortage or the excess of stock found, in the value of stock of raw material, finished goods involving duty of ₹ 7,89,335/- with proposal for confiscation under Rule 25 of CER, 2002 with further proposal to demand Service Tax of ₹ 89,985/- on Reverse Charge Basis on Intellectual Property Services received from abroad with further proposal to impose penalty. 7. The SCN was adjudicated on contest and the proposed demands were confirmed vide Order-in-Original dated 29/05/2009 and equal amount of penalties imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the stock taking found, a cogent explanation was given in the statement recorded soon after the stock verification, that the variation is due to the method of stock verification as there has been no actual weighment, but only a small sample of 10 ingots/billets were actually weighed and such average weight was multiplied with the number of ingots and the billets. Similarly the stock of finished goods was also done by way of eye estimation. In such manner of verification there has to be allowance for variation. Admittedly, such variation have been found to be only 2 to 3% and as such did not call for any adverse inference against the appellant. Thus the whole exercise by the Revenue in issuing the show cause notice and confirming the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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