Custom, Excise & Service Tax Tribunal
M/S. Sapna Packaging Industries vs Cce, Chennai on 12 August, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/S/192/2010 and E/356/2010
(Arising out of Order-in-Appeal No.27/2010 (M-II) dated 16.3.2010 passed by the Commissioner of Central Excise (Appeals), Chennai)
For approval and signature:
Honble Shri M. Veeraiyan, Technical Member
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Member wishes to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
M/s. Sapna Packaging Industries Appellants
Vs.
CCE, Chennai Respondent
Appearance Shri G.Natarajan, Advocate for the Appellants Shri C. Rangaraju, SDR for the Respondent CORAM Honble Shri M. Veeraiyan, Technical Member Date of Hearing: 12.08.2010 Date of Decision: 12.08.2010 Final Order No. ____________ This is an appeal against the order of the Commissioner (Appeals) No. 27/2010 (M-II) dated 16.3.2010.
2. Considering the nature of dispute I waive predeposit of dues as per the impugned order and with the consent of both sides I take up the appeal for final disposal.
3. Heard both sides.
4. The relevant facts in brief are that the appellants are a manufacturer of corrugated boxes falling under Sub-Heading 481912000 and they use duty paid kraft paper as inputs. The appellants were availing the benefit of Notification No. 8/2003 for the year 2006 07 and after exhausting the duty-free clearances paid duty and have taken credit of duty paid on the inputs. The appellants opted for the benefit of Notification No.8/2003 with effect from 1.4.2007. Taking the closing stock of kraft paper as on 31.3.2007 as 1,07,983 Kgs. (OB as on 1.4.06 3,54,14 kgs.; Receipt 6,90,759 kgs. and Issue 6,18,191 kgs.) the appellants reversed the credit of Rs.1,51,224/- on 27.4.2007. The officers of internal audit party visited the unit between 3.10.2007 and 5.10.2007 and found from the private records the closing stock of kraft paper as on 31.3.2007 as 3,87,282 kgs. (OB 35,414; Receipt 6,90,759 kgs. and Issue 3,38,892 kgs.) and accordingly held that the appellants were required to reverse credit/pay duty of Rs.4,79,391/- for opting to avail the exemption from 1.4.2007. The appellants produced a reconciliation statement on 9.11.2007 claiming that they have wrongly adopted the conversion ratios of input/final product in respect of various varieties of corrugated boxes and the closing balance should be actually 1,69,209 kgs. (OB 35,414; Receipt 6,90,759 kgs. and Issue 5,56,965 kgs.). According to the appellants the duty payable was only Rs.2,39,229/- which include a sum of Rs.1,51,224/- paid in April 2007. The original authority did not accept the reconciliation statement and confirmed the differential duty of Rs.2,40,162/- along with interest and imposed equal amount of penalty under Rule 15 of CENVAT Credit Rules, 2002. Commissioner (Appeals) has upheld the order of the original authority.
5. Learned counsel for the appellants submits that there is no dispute about the opening balance of kraft paper as on 1.4.2006 which is 35,415 kgs. and that there is no dispute about the quantity received by them during the year which is 6,90,759 kgs. The dispute relates to the actual quantity issued for consumption. He fairly concedes that the closing balance which they adopted for paying duty at the time of opting for exemption is not correct. However, he submits that the tally sheet found by the audit officers was an erroneous document prepared based on incorrect conversion ratios. The department has not sought any clarification from any officers on the said tally sheets. The department has brushed aside the reconciliation statement given by them on 9.11.2007. Therefore, he seeks setting aside the differential duty and the penalty imposed. He also submits that if the quantity of closing balance of kraft paper as adopted by the department is to be accepted, it would mean that the production/clearance figures must be on the lower side. The department has not chosen to verify and rebut the conversion ratios adopted by them in preparing the reconciliation statement and the same has been dismissed as an after thought. Alternatively, learned counsel submits that in the absence of any evidence of clandestine removal of inputs the sustaining of penalty equal to duty demanded is not justified and the same should be set aside.
6. Learned SDR strongly supports the order of the lower authorities. He submits that the appellants have procured the duty paid inputs and taken credit of the same. They are under obligation to account for the inputs on which credit has been taken. Admittedly, the appellants have not maintained the proper records as they themselves are revising the figures adopted by them in April 2007. Their method of ascertaining the stock of inputs based on the quantum of final products and alleged conversion ratios is not an acceptable method. The tally sheet was recovered from their premises which indicate the closing balance and the original authority has correctly adopted the same and demanded the differential duty which has been upheld by the Commissioner (Appeals).
7. I have carefully considered the submissions from both sides and perused the records. I find that there is no dispute relating to the opening balance of kraft paper as on 1.4.2006 and also the quantity of kraft paper procured by the appellants during the entire year which is 6,90,759 kgs. The perusal of accounts maintained in the tally print out indicates quantity of inputs received and issue month wise. The figures given are obviously not approximate. For example it shows 45,701 kgs. as issued in July 2006 and 28,843 Kgs. as issued during the month of November 2006 etc. The claim on behalf of the appellants that they are working out the quantum of kraft paper issued based on final products obtained by them does not deserve to be considered. It is not their case that they are not receiving specific quantity of various varieties of kraft paper from their buyers and the same stands accounted by them correct to a kilogram as receipts in their records. The claim that they were not issuing specific and known quantity for production appears to be an after thought requiring them to work out the quantity issued backwards from the quantity of final products manufactured. I hope that they are not following this method even now! As the appellants have received duty paid inputs and taken credit, they are under strict obligation to account for use of the input so received for the intended purpose. Any failures to account for the same results in an obligation to reverse the credit involved or pay equal amount as duty. The explanation given regarding the figures mentioned in the tally sheet being not authentic is not acceptable. The reliance placed by the department on this figures for demand of duty cannot be faulted. Therefore, the demand of duty and interest deserves to be upheld.
8. However, every shortage which is not accounted cannot be presumed to be a case of clandestine removal in the absence of any evidence corroborating the same. In the present case, on perusal of the Show Cause Notice it is found that no such evidence about clandestine removal is being relied upon. Therefore, the penalty equal to the duty demand confirmed may not be warranted.
9. In view of the above, the appeal is disposed of as follows:-
(a) The differential duty demand of Rs.2,40,162/- along with interest is upheld.
(b) The penalty imposed is reduced from Rs.2,40,162/- to Rs.50,000/- (Rupees fifty thousand only).
(Dictated and pronounced in open court) (M. VEERAIYAN) Technical Member Rex ??
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