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TMI Blog2018 (3) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal has been filed by the revenue against order dated 30.11.2005 passed by the Commissioner, Central Excise Customs, Mumbai. The brief facts of the case are that the Respondents are engaged in the manufacture of Industrial and automotive grade Lubricants at their unit. They were periodically conducting reconciliation of stocks of inputs and finished goods and were reducing the short quantities arrived during such reconciliation. The same was shown in their statutory records and was also informed to the revenue from time to time. Based upon the same they were issued show Cause Notice demanding duties on such reduction of quantities done by them as well on basis of input output ratio in case of one of the input Mono Ethlene Glycol (MEG). Duty was also demanded alleging that the goods sent to jobworker/ refillers has been undervalued by claiming abatements under the head of distributors discounts/ rebates etc. The adjudicating authority vide impugned order set aside the demands on being satisfied with the reconciliation shown by the Appellant as well as in view of the fact that quantum of shortage is miniscule percentage. He also held that as no goods have been removed without p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing software and therefore the alleges shortages are not due to any removal of goods but are merely arising due to reconciliation of stocks which are normally undertaken at their unit. The quantity of raw materials and finished goods physically available in the plant are checked. The excess and the shortages identified at the time of such stock taking are corrected in the books and shortages are charged to consumption. This fact was no secret as the same was published in their annual reports as well as the jurisdictional excise officers were also informed about such differences. That the Revenue initiated inquiries in January 2001 and without undertaking any physical stock checking at the plant issued show cause notice dt 6.10.2003 for the period September 1998 May 2001 raising demand on the ground that the difference between the physical stock of raw material and finished goods counted by the Respondent every quarter and alleged the difference have been occurred due to clandestine removal. He submits that the allegation of clandestine removal is to be proved by the Department by showing positive evidence. That the adjudicating authority was himself able to record that in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomobiles in 2001-2002. While it pays central excise duty on the automobiles produced and cleared, it is entitled for availing of Modvat credit in respect of inputs (parts, components, consumables, etc.) used in the production of those automobiles. The manufacture involves use of about 14,000 parts/inputs procured from several hundred suppliers. In an year, several lakh consignments of inputs are received (13.18 lakhs in 2001-2002). The accounting of these parts being a very complex problem the appellant carries this out on their computers. Annual physical check is also carried out. For the years 1999-2000, when the appellant carried out physical stock verification of the inputs, a large variation involving several crores (211) Rupees worth parts was observed. The appellant reconciled this variation and found that shortage worth ₹ 27.67 was not getting reconciled. Similar was the position in respect of excesses worth ₹ 17 crores. The order impugned has been passed in view of the shortages being unreconciled. 2.The submission of the appellant is that the? shortages and excesses are merely the results of accounting errors and there is no wrong availment or utilisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a daily basis in a register or in such a conventional method of book-keeping. Therefore, the method adopted by the appellant is that there is no separate store for the inputs; they are delivered by the suppliers at the required locations in the production plant. The receipt of the inputs is captured from the suppliers documents by the computer. Similarly, the consumption of inputs is worked out pro rata on a monthly basis from the number of cars produced and the number of parts required for the manufacture of each variety of vehicle. The appellant has pointed out that errors can creep in for many reasons, like incorrect part numbers being captured in the computer data, consumption of parts in the manufacture of sub-assemblies going unrecorded, errors in noting down the various types of parts during physical verification, etc. The appellants also pointed out that, during reconciliation, though the Customs Authorities have accepted many of the shortages as explained and reconciled, a huge quantity of excesses of about ₹ 17 crores remains unreconciled on account of the fact that the shortages and excesses are in respect of parts in respect of different varieties of vehicles. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant has failed to fully account for the inputs (Rule 57-I). This rule allows recovery of the credits incorrectly or improperly taken. In the present case, there is no allegation that original credit taken was incorrect or improper. The allegation is that, in view of the shortages noticed, the appellant has failed in showing that the inputs on which credit had been taken had been properly disposed of in terms of the Rules. Broadly speaking, the disposals allowed under the Rules are, use in the manufacture of final products, and clearance of inputs after reversal of the credit. In the present case, the demand is on account of the fact that there are some shortages which are not reconciled. The appellant s submission is that full reconciliation is not possible and that that is no ground to hold that goods have been improperly disposed of. The appellants have explained that they have a detailed and reliable system of accounting of inputs and that all aspects including pilferage are taken care of. It has been pointed out that wherever the inputs have been disposed of other than in the manufacture of final products, including pilferages detected, the appellants have reversed Modv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal vide Final Order No. A-1430/WZB/2004/C-III dt 17.11.2004 held that as there is no proof for removal of any input from the factory, hence no demand is sustainable. The adjudicating authority has found that the difference in stock of raw material and finished goods was negligible and in absence of any evidence of clandestine removal, no duty can be demanded from the Respondent. We do not find any reason to deviate from the findings made by the adjudicating authority, hence hold that the demands raised on above grounds are not sustainable. In case of demand made on valuation of goods sent to re-fillers, we find that the issue involved is revenue neutral, hence we hold that the demands are not sustainable since whatever duty was paid by the respondent was available to the re-fillers as credit. Similarly in case of demand on account of MEG, we find that the Respondent has also challenged the manner of verification conducted by the revenue. Further the adjudicating authority has also held that the shortage quantity is justified as being result of reconciliation conducted in past. Also there is no instance of removal of goods. In such given findings by the adjudicating authority a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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