Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Bolpur vs M/S. Alloy Steel Plant, Durgapur (A Unit ... on 6 December, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.E/93/2009
(Arising out of Order-in-Appeal No.72/BOL/2008 dated 14.11.2008 passed by the Commissioner (Appeal-IV), Central Excise, Kolkata)
Commissioner of Central Excise, Bolpur
Applicant (s)/Appellant (s)
Vs.
M/s. Alloy Steel Plant, Durgapur (A unit of SAIL)
Respondent (s)
Appearance:
Shri J.Bose, AC(AR) for the Appellant (s) Shri T.Chakraborty, Advocate for the Respondent (s) CORAM:
Honble Shri P.K.Choudhary, Member (Judicial) Date of Hearing:-06.12.2016 Date of Pronouncement:31.1.2017 ORDER NO. FO/A/75069/17 Per Shri P.K.Choudhary
1. Revenue is in appeal against the impugned order wherein the lower appellate authority has observed that the show cause notice was issued by the Range Superintendent after normal prescribed period of six months from the relevant date and allowed the assessees appeal.
2. Briefly stated the facts of the case are, that during annual stock verification for the year 1986-87 & 1987-1988, it was noticed that there was a shortage of 1413 MT of finished products billets, etc. and 1622 MT of semi-finished product of iron and steel. The show cause notice dated 05.03.1991 was issued and vide Order-in-Original dated 12.03.2007 demand of Rs.11,07,775/- was confirmed along with applicable interest and imposed penalty under Rule 173Q (1)(b) equal to the amount of duty. On appeal, the Commissioner (Appeals) allowed the assessees appeal on limitation, hence the present appeal.
3. Ld. Counsel on behalf of the respondent, submitted that the demand cannot be made under Rule 223A, because under Rule 223A the Commissioner is supposed to order verification of stock of the finished goods. In the instant case the respondents themselves have conducted the stock verification and the departmental officers simply associated themselves with the verification. In these circumstances, Rule 223A cannot be invoked, as all the ingredients of Rule 223A have not been fulfilled. The stock verification is based only on estimation. There was actually no weighment at all. Normally in steel plants, the stock verification is based on estimate and only when the goods are cleared, they are weighed. Therefore, a demand simply based on the shortage arrived at from the estimated quantity cannot be accurate and is not sustainable. Ld. Advocate cited the decision of the Tribunal in their own case in M/s. Steel Authority of India v. CCE, Bhubaneswar reported in 2001 (47) RLT 343 (Tribunal), wherein it was held that difference in figures of manufacture and clearance between the annual financial accounts and RG-1 cannot form the basis for demand of duty, when there is nothing on record to show that the respondents have indulged in clandestine clearance without payment of duty. It was further pointed out that demand is also hit by time bar, as Section 11A is clearly applicable for short-levied duty even arising from for stock challenge or stock taking under Rule 223A of the Central Excise Act. There is no allegation of suppression of facts, fraud, etc., to invoke longer period. Ld. Advocate submitted that the show cause notice issued is beyond jurisdiction and is liable to be quashed and the department is in appeal only on the point of limitation and have not challenged on merits. Regarding the shortage of stock of semi-finished goods for 1622 MT, the Ld. Advocate submits that semi-finished or to be precise, in process materials are mostly in hot condition. The materials are lying in rolling bed, in furnace, for annealing/pickling, heat treatment. The weight of these materials are taken on certificate basis i.e. theoretical weight. So in true sense, the shortages in semi-finished materials does not carry any sense. The materials in semi-finished condition further passes through finishing process to be fit for dispatch to the customers/stockyard and the ultimate weight of the said materials is arrived at the finishing stage only and shortage/excess could really be ascertained at this stage i.e. finished stage only. Regarding shortage in stock of saleable materials 1413 MT, the Ld. Advocate submits that during 1986-1987 shortage of 554 MT has been found in stock of saleable materials. During this period, the total production of saleable materials was 82015 MT i.e. the total shortage of 554 MT was well within the acceptable norm of 1% for iron and steel products. During the year 1987-88 shortage of 859 MT has been found against the total production of 89175 MT. Here also, the total shortage was well within the acceptable norm of 1%. The shortage in stock of saleable materials occur due to reasons i.e. sectional weight variation, transport, handling, difference in the physical and theoretical weight. Ld Advocate further submits that production of the materials is recorded on the basis of a yield percentile. In this method of calculation, there is bound to be certain variation and in fact, variation is inherent in this method. The ratio of yield percentile is by very nature cannot be constant, fixed, invariable, mathematically precise one.
4. It is case of the respondent assessee that the difference between the quantity of physical stock and RG-1 is attributable to the fact that these quantities are arrived at on the basis of estimation and not actual weighment appears to be a practice followed by all units of SAIL all over India. The RG-1 is only based on the estimated production and not based on actual weighment. Physical stock is also based on estimation of weight on the basis of volumetric estimate and conversion to theoretic weight based on sectional weight. A comparison between two estimation is inherently inaccurate.
5. Heard both sides and perused the appeal records.
6. The Commissioner (Appeals) observed as under:
The Central Government, drawing from this ratio of the CEGAT judgment, held that. Rule 223A and Section 11A of the Act have to be construed accordingly. Under Section 11A 3(C ), the relevant date for computing the limitation is the date on which the duty is to be paid. The duty in this case becomes payable on the date of the stock taking under Rule 223A. Therefore, the date of stock taking of goods is the relevant date for computing the time limitation under Section 11A read with Rule 223A and limit of six months shall normally apply.
7. The issue is no more res-integra in view of the decision of the larger bench of the Tribunal in the case of Rourkela Steel Plant vs. Commissioner of Central Excise, Bhubaneswar [2008(227) ELT522 (Tri-LB)]. In that case the larger bench held that Section 11A and Rule 223A deal with different situations and that the period of limitation prescribed under section 11A is not applicable to a situation contemplated under Rule 223A. Therefore, the limitation under section 11A of the Central Excise Act, 1944 would not be applicable under Rule 223A of the erstwhile Central Excise Rules, 1944. Hence, the finding of the Commissioner (Appeals) cannot be sustained in the eye of law. However, I find that the Commissioner (Appeals) had not decided the matter on merits. It is appropriate that the matter should be remanded to the Commissioner (Appeals) to decide on merits.
8. In view of the above discussions, the impugned order of the Commissioner (Appeals) on limitation is set aside. It is held that the period of limitation under section 11A of the Central Excise Act, 1944 would not be applicable to a situation as contemplated under Rule 223A of the erstwhile Rules 1944. The matter is remanded to the Commissioner (Appeals) to decide on merits after observing the principles of natural justice. The appeal filed by the Revenue is disposed of in the above terms.
(Pronounced in the open court on 31.01.2017) S/d.
(P.K.Choudhary) MEMBER (JUDICIAL) ss 5 Appeal No.E/93 of 2009