Custom, Excise & Service Tax Tribunal
M/S.Raika Ispat Udyog Pvt. Ltd vs Cce, Raipur on 15 July, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:5.7.2016
Date of Decision:15.07.2016
Excise Appeal No.E/51345/016-EX(SM)
[(Arising out of Order-in-Appeal No. 155/2015 dated 9.2.2016 passed by the Commissioner (Appeals), Central Excise, Raipur (CG)]
For Approval and Signature:
Honble Shri B. Ravichandran, Member (Technical)
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Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
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Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether Their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
M/s.Raika Ispat Udyog Pvt. Ltd. Appellants
Vs.
CCE, Raipur Respondent
Appearance:
Rep. by Shri Naveen Mullick, Advocate for the appellant.
Rep. by Shri M.R. Sharma, AR for the respondent.
Coram: Honble Shri B. Ravichandran, Member (Technical) Final Order No.52462/2016 Dated:15.07.2016 Per B. Ravichandran The appeal is against order dated 9.12.2016 of Commissioner (Appeals), Raipur. The appellants are engaged in the manufacture of H.B. wires and Binding Wires liable to central excise duty. They were also availing cenvat credit on various inputs and capital goods in terms of Cenvat Credit Rules, 2004. In March, 2014, the officers of Central Excise conducted stock verification of raw materials and finished goods in the premises of the appellant. Upon such verification, the officers arrived at a shortage of 79.573 MTs of H.B. Wires (raw materials), 23.069 MTs of H.B. Wires (finished goods) short. Proceedings were initiated against the appellant for recovery of duty of Rs.4,73,759/- on the ground that the said goods have been cleared without payment of duty. The Original Authority confirmed the demand and imposed equal amount of penalty. On appeal, the Commissioner (Appeals) vide his impugned order upheld the demand and penalty.
2. Against this order, the appellant is in appeal.
3. Ld. Counsel for the appellant submitted mainly on the following grounds:-
(a) The stock verification of finished goods and raw materials were based on estimation and not on actual verification by weighment. As can be seen from the Panchnama dated 25.3.2014 the officers picked random bundles of wire and wire rods and after checking up the weight of 5 such bundles, took average and applied it to arrive at the total weight of the stock. The weight of the each bundle varies and arriving at the total stock weight by average method only give an approximation. No duty can be demanded on such rough estimation.
(b) In the statement given before the officers, Shri Vikas Raika, Director did not admit to any shortage or unaccounted clearance of raw materials or finished goods. It is clear that out of 10 questions answered by him, he specifically stated questions no.1 to 8 are typed on his request correctly referred his version. As can be seen that question no.9 deals with shortage of finished and raw materials, which was not admitted.
(c) The appellants unit were engaged in the manufacture of these excisable items for the past 10 years and were maintaining all the records and there is no irregularity in the accounts maintained by them. While checking the stock of the finished goods and raw materials, the officers did not verify the availability of goods in process (semi-finished goods);
(d) There is no evidence adduced by the department regarding alleged unaccounted clearance of excisable goods by the appellant. The whole demand is based on the alleged shortage of raw materials based on the rough estimation. In absence of any evidence of illicit manufacture, unaccounted clearance, transport, etc., no duty demand can be sustained.
(e) Reliance was placed on various decided cases to reiterate that mere shortage of raw materials alone cannot sustain the charge of clandestine removal.
4. Ld. AR supported the findings of the lower authorities. He stated that stock taking was done in the presence of two witnesses and the Director of the appellant. No objection was taken by the appellant at that time. Having agreed to the shortage, it is for the appellant to explain such shortage. The demand of duty towards such materials found short is legally sustainable.
5. Heard both the sides and examined the appeal records.
6. The only point for decision is that correctness of duty demand made against the appellant based on the stock verification of the goods. The admitted facts are that the appellant maintained all records and there has been no allegation of any irregularity on that account. The stock taking was conducted based on average weight of a few bundles of wire rods and H.B. wires. It is also an admitted fact that one bundle of H.B. Wires varies in weight from another bundle by a few kilograms. As such, taking an average of 5 bundles and projecting the average weight for arriving at the total weight of the stock can, at best, give a rough estimation of the stock. That being so, the allegation of clandestine removal of such roughly estimated quantity cannot be sustained without some sort of collaboration with reference to manufacture, clearance and transport and buyers of such clandestinely manufactured items. Here, the shortages have not been admitted by the appellant as can be seen from the statement dated 25.03.2014 of the Director. In the conclusion of the statement, he admitted that his response from questions 1 to 8 is correct. The shortage and the procedure to arrive at the stock weight was specifically mentioned in question no.9, which it appears has not been admitted specifically by the Director. In Anand Founders & Engineers - 2016 (331) ELT 340 (P&H), the Honble Punjab & Haryana High Court held that mere shortage of finished goods in stock taking is not enough to hold the charge of clandestine removal. In Chandrapur Enterprises Ltd. 2014 (310) ELT 904 (Tribunal-Delhi), the Tribunal held that when the quantity of finished goods was determined on estimation basis only, the same cannot be treated as real shortage for alleging clandestine removal. In R.S. Industries 2014 (301) ELT 382 (Tribunal-Calcutta), it was held by the Tribunal that even when shortage is admitted but no investigation was done to establish clandestine removal of goods, no penal action can be taken against the assessee.
7. Considering the facts of the present case, I find that apart from the allegation of shortage based on estimation, no other corroborative evidence is presented to show that possible clandestine manufacture, clearance, transport or buyers of such goods. In view of such position, I find that the demand, as confirmed by the impugned order, cannot be sustained. Accordingly, the impugned order is set aside and the appeal is allowed.
[Order pronounced on 15.07.2016] ( B. Ravichandran ) Member (Technical) Ckp.
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