Custom, Excise & Service Tax Tribunal
Cce, Kanpur vs M/S Bee Kay Enterprises on 25 October, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV Excise Appeal No. 966 of 2008 (SM) [Arising out of the Order-in-Appeal No. 28-CE/APPL/KNP/2007 dated 29/01/2008 passed by The Commissioner (Appeals), Customs & Central Excise, Kanpur.] For Approval and signature : Honble Shri Rakesh Kumar, Member (Technical) 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 would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? CCE, Kanpur Appellant Versus M/s Bee Kay Enterprises Respondent
Appearance Shri B.B. Sharma, Authorized Representative (DR) for the appellant.
Shri Ashish Kumar Shukla, Adovcate - for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) DATE OF HEARING : 25/10/2013.
Final Order No. 58154/2013 Dated : 25/10/2013 Per. Rakesh Kumar :-
The respondent are manufacturers of various parts of Scooter Reed Strip, Reed Brake Lever, Hinge, Reed Brake Lever Assay & Shockers Plate chargeable to Central Excise duty. The raw material required for manufacture of their final product are CR sheets/Coils/HR Sheets, Brass Sheets, Jointing and CR Tubes in respect of which they take Cenvat credit. On 22/2/06 their factory was visited by the Central Excise officers and stock of the Cenvat credit availed raw materials and finished goods was checked in presence of two independent Panch witnesses and Shri Devendra Katiyar, Authorised Signatory. While no irregularity was found in the stock of finished goods, in the stock of Cenvat credit availed of raw materials, there was shortage of 16.750 M.T. of CR sheets, 20.2 MT of HR sheets, 0.416 M.T. of Brass Sheets, 5.5 M.T. of Channels, 5.1 M.T. of C.R. Tube involving of duty of Rs. 2,00,344/-. Shri Katiyar on being asked accepted the shortage, but on being asked to explain the same, stated that the same may be due to improper maintenance of records. At that time inquiry was also made with Shri R.B. Sharma, Proprietor of the appellant firm, and he also accepted the shortage and signed the stock taking report in token on his agreement. The Cenvat credit involved on the goods found short Rs. 2,00,344/- was paid by the respondent within a period of three months. Subsequently, after issue of show cause notice, the Jurisdictional Assistant Commissioner vide order-in-original dated 23/8/06 confirmed the above-mentioned demand alongwith interest but did not impose any penalty on the respondent on the ground that the Cenvat credit involved had been paid before the issue of show cause notice. On appeal being filed by the Revenue to Commissioner (Appeals) for imposition of penalty on the respondent, Commissioner (Appeals) vide order-in-appeal dated 23/2/07 the same was dismissed. The Commissioner (Appeals) in his order had observed that there is no evidence to show that the Cenvat credit availed inputs found short had been clandestinely cleared. However, he upheld the shortage of the cenvated inputs and the demand of Cenvat credit in respect of the same. Against the order of the Commissioner (Appeals) dropping the penalty, the present appeal has been filed by the Revenue.
2. Heard both the sides.
3. Shri B.B. Sharma, learned DR, assailed the impugned order by reiterating the grounds of appeal and pleaded that the shortage of 16.750 M.T. of CR sheets, 20.2 MT of HR sheets, 0.416 M.T. of Brass Sheets, 5.5 M.T. of Channels, 5.1 M.T. of C.R. Tube stands admitted by the respondent, that in spite of this, no satisfactory explanation for these shortages, which are huge, has been given other than stating that the same may be due to improper stock keeping, that the shortage of this magnitude for which no explanation has been given can be only due to clandestine removal of the Cenvat credit availed goods and that in the facts and circumstances of the case, the impugned order waiving the penalty on the respondent under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC of the Central Excise Act, 1944 is not correct. He in this regard relied upon the Apex Courts judgment in the case of Rajasthan Spinning and Weaving Mills reported in 2009 (238) E.L.T. 3 (S.C.), wherein the Apex Court has held that when the elements for imposition of penalty under Section 11AC are present, the penalty under this Section has to be imposed irrespective of whether the duty involved on the goods cleared clandestinely had been paid before the issue of show cause notice. He, therefore, pleaded that the impugned order is not correct.
4. Shri Ashish Kumar Shukla, Advocate, the learned Counsel for the respondent, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that merely on account of shortage in the account of Cenvat credit availed inputs, it cannot be concluded that those inputs had been cleared clandestinely without payment of an amount equal to the Cenvat credit availed, that the Tribunal in the case of Vikram Cement (P) Ltd. vs. CCE, Kanpur reported in 2012 (286) E.L.T. 615 (Tri. Del.) has held that clandestine removal cannot be presumed merely because there was shortage of the stock or recovery of some loose papers, that same view has been taken by the Tribunal in the case of CCE, Kanpur vs. Ambica Polytubes reported in 2013 (290) E.L.T. 317 (Tri. Del.), wherein it was held that merely on the basis of shortages in the stock of finished product, the duty liability in respect of which was admitted by the assessee, it cannot be presumed that the goods found short had been clandestinely cleared so as to invoke the Section 11AC, that same view has been taken by Honble Punjab & Haryana High Court in the case of Commissioner vs. H.S. Steels (P) Ltd. 2012 (286) E.L.T. A178 (P&H), wherein it was held by Honble High Court that merely on the basis of shortages of finished goods, the presumption of clandestine removal cannot be made and this allegation must be backed by same evidence of record. He, therefore, pleaded that there is no infirmity in the impugned order.
4. I have considered the submissions from both the sides and have perused the records.
5. The shortage in the stock of inputs to the tune of 16.750 M.T. of CR sheets, 20.2 MT of HR sheets, 0.416 M.T. of Brass Sheets, 5.5 M.T. of Channels and 5.1 M.T. of C.R. Tube, vis-`-vis their balance in the RG-23A account is not denied. On the contrary the shortage stands accepted not only by Shri Devendra Katiyar, Authorised Signatory of the respondent in whose presence the stock taking had been conducted, but also by the Shri R.B. Sharma, the Proprietor of the respondent unit. The duty liability on the respondent in respect of cenvated input found short is also not disputed. The only point of dispute is as to whether shortage of the cenvated input is to be treated as clandestine removal so as to warrant the imposition of penalty under rule 15 (2) of Cenvat Credit rules, readwith Section 11AC or it should simply be treated as shortage due to unspecified reasons not warranting imposition of penalty under Section 11AC. The Tribunal in the case of Vikram Cement (P) Ltd. vs. CCE, Kanpur (supra), CCE, Kanpur vs. Ambica Polytubes (supra) and Honble Punjab & Haryana High Court in the case of Commissioner vs. H.S. Steels (P) Ltd. (supra) has held that merely on the basis of shortage of finished goods or cenvated raw material it cannot be presumed that the goods found short had been clandestinely removed and that the allegation of clandestine removal should be supported by some positive evidence. In my view whether shortage of finished goods or of cenvated raw material is the result of clandestine removal or due to some reasons other than the clandestine removal, has to be determined on the basis of facts of each case. If there is a huge shortage of finished goods for which there is no satisfactory explanation, a presumption can be made that the same is due to clandestine removal. In case of Cenvat credit availed inputs, if there is huge unexplained shortage, vis-`-vis the balance recorded in RG-23A register, the same can be either due to clandestine removal of cenvated inputs without payment of duty or due to fraudulent availment of Cenvat credit on the basis of bogus invoices without actual receipt of the goods covered under those invoices. In both the case the burden of proving that such shortage of finished goods or of cenvated inputs is due to bonafide reasons would shift to the assessee. In the present case, the shortage of CR Sheets and HR Sheets, which is to extent of 16.750 M.T. and 20.2 MT respectively is huge. Similarly, shortage in respect of the channels and CR Tubes is to the tune of 5.5 M.T. and 5.1 M.T. respectively. The respondent while accepting the fact of these shortage have not given any explanation for the same other than stating that the same may be due to improper stock keeping. In my view, the explanation given by the respondent for these shortages is not satisfactory and therefore the same are to be treated as due to clandestine removal of cenvated inputs and accordingly penalty under Rule 15 (2) of Cenvat Credit Rules, 2004, readwith Section 11AC of the Act would be attracted. In view of this, I hold that the impugned order waiving the imposition of penalty on the respondent under Section 11AC is not correct and the same has to be set aside. However, since the entire duty alongwith interest had been paid before the issue of show cause notice and no option to pay lower penalty under proviso to Section 11AC has been given in the order-in-original, in accordance with the judgment of Honble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. Union of India reported in 2008 (228) E.L.T. 31 (Del.), the benefit of lower penalty equal to 25% of the duty demand confirmed cannot be denied.
6. In view of the above discussion, the part of the impugned order setting aside the penalty under Section 11AC is set aside and on this point, the Assistant Commissioners order is restored with modification that the penalty under Section 11AC would be 25% of the duty demand if the same is deposited by them within a period of 30 days from the date of receipt of this order. In case the penalty equal to 25% of the duty demand is not deposited within 30 days time from the date of receipt of this order, the normal penalty under Section 11AC equal to the duty demand would be applicable. Revenues appeal stands disposed of, as above.
(Dictated and pronounced in the open court.) (Rakesh Kumar) Member (Technical) PK ??
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