Custom, Excise & Service Tax Tribunal
M/S Roll Tubes Limited vs Cce, Kanpur on 21 February, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing : 21.2.2012
Excise Appeal No. 1212 of 2005
[Arising out of the Order-in-Appeal No. 656-CE/APPL/KNP/04 dated 31.12.2004 passed by the Commissioner (Appeals), Customs & Central Excise, Kanpur]
Coram:
Honble Ms. Archana Wadhwa, Member (Judicial)
Honble Shri Mathew John, Member (Technical)
1. Whether Press Reporter 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 Whether their Lordships wish to see the fair copy of the order?
4. Whether order is to be circulated to the Department Authorities?
M/s Roll Tubes Limited Appellants
Vs.
CCE, Kanpur Respondent
Appearance:
Appeared for Appellant : Shri Amit Jain, Advocate
Appeared for Respondent : Shri S.R. Meena, A.R.
CORAM: Honble Ms. Archana Wadhwa, Member (Judicial)
Honble Shri Mathew John, Member (Technical)
Order No.dated.
Per Mathew John :
In this case, the Appellants are manufacturers of black steel tubes and galvanised steel tubes falling under Sub-Heading No. 7306.90 of the First Schedule to the Central Excise Tariff Act 1985. The Central Excise officers visited their factory premises on 5.6.99 and conducted a stock taking of the goods. They came to a conclusion that there was a shortage in the stock of black steel tubes to the extent of 314.016 MTs being the difference between the physical stock in the factory on that day and the stock as accounted in their registers. Revenue was of the view that this shortage was due to clandestine removal of manufactured goods. On that basis, they issued a demand of excise duty payable on such goods found short. The Show Cause Notice has been adjudicated confirming the duty demand of Rs.11,04,840/- along with interest and penalty under Section 11AC. On Appeal filed by the Appellants with the Commissioner (Appeals) they did not get any relief and aggrieved by the order of the Commissioner (Appeals), the Appellants have filed this Appeal.
2. The Counsel for the Appellants submits that the quantity of black steel tubes was accounted in their statutory records in MTs. While ascertaining the physical stock available in the factory the goods lying in the factory were not weighed. The officer measured the length and diameter of the pipes lying in stock on that day and calculated the weight assuming the weight per meter of the tubes classifying the tubes into three categories as light, medium and heavy. The objection of the Appellants is that the assessment regarding the weight per meter for each of the three categories is not correct and for such estimation the thickness of each of the tubes should have been ascertained and when such thickness is not known, the weight per meter assumed cannot be relied upon. It is also contended that Revenue has not explained the basis for adopting such standard linear density of the pipes. The Counsel points out that Revenue is also relying on the fact that there was a shortage of 314.016 MT of pipes and Shri C.S. Singh, the authorised signatory of the company present during the search admitted that the stock physically found was only 1102.144 MTs and admitting shortage of 314.06 MT. It is contested that the evidence testified by the panchas can be relied upon only for the length and the number of pipes of each category found because only these were the parameters which the panchas could have clearly understood and the rationale of calculating the weight of the goods based on length and categorisation of the pipes into the light, medium and heavy and assuming a linear density could not have been understood by the panchas and shortage recorded in Mahozar is not a proven fact. The Revenue is also relying upon an internal record with heading Following Material are cleared for Desptach (29/5) showing the materials cleared for despatch on 29.5.99 to be 1003.370 MTs. As per RG-I register the closing stock on 29.5.99 was 1421.870 MTs. According to Revenue these records show that there was a shortage of 418.5 MTs of stock on 29.5.99 itself that is almost one week earlier to the stock taking done by the officers.
3. The Counsel for Appellant submits that the said document indicates only the material which is cleared for despatch on that day and it cannot be relied upon to show the physical quantity available in the factory because the inspection department is not aware of opening balances and despatches.
4. The contention of the appellants are the following :-
(a) During stock taking loose quantity was not verified and weighed.
(b) During stock taking total number of pieces and length and diameter were identified without identification of thickness, of the sheets used.
(c) Linear density value has been adopted without segregating the pipes in question according to the thickness, of sheets used.
(d) The basis on which linear density value has been adopted to calculate the weight of pipes has not been disclosed.
(e) There is no evidence of clandestine removal and without such evidence the demand of duty made on the basis of estimated measurement of stock and shortages arising from such estimation cannot be made.
5. The A.R. for Revenue submits that it is clearly recorded in the panchnama that there was a shortage of 314.016 MTs. It is also recorded that the authorised representative of the company in whose presence the stock taking was done was not able to explain the reasons for such huge difference in stock at the time of stock taking. After having admitted such difference at the time of stock taking they cannot now challenge the method by which the shortage in stock was arrived at. He relies on the decision of the Madras High Court in the case of Alagappa Cements Pvt. Ltd. Vs. CEGAT, Chennai 2010 (260) ELT 511 (Mad.) where it was held that shortage of clinkers and excess quantity of limestone mined was sufficient to conclude clandestine manufacture and the High Court upheld the demand for duty. He also relies on the decision of Himachal Pradesh High Court in the case of CCE Vs. International Cylinders Pvt. Ltd. 2010 (255) ELT 68 (H.P.) where High Court upheld the demand for duty on stock of goods found short.
6. We have considered argument on both the sides. We are of the view that before coming to a firm conclusion about the shortage detected during the stock taking the nature of commodity and the method of stock taking done has to be taken into account. We find that the commodity involved in this case is accounted in RG-I register in MTs and the stock verification is done by measuring the length of the pipes and the number of the pipes by segregating the pipes into three broad categories of light, medium and heavy. Thereafter weight per meter for each of the three categories are assumed and total weight of all pipes is arrived at. The basis of the standard linear density adopted is not explained. There is nothing in Panchnama to show that correctness of linear density has been verified by weighing at least sample pipes from the three categories. It is very obvious that the weight per meter depend upon the thickness. Thickness of sheets used is not recorded in Panchnama. In the absence of these critical parameters the ascertained stock as per the Panchnama is not reliable. The fact that Shri C.S. Singh was not able to explain shortage at the time of stock taking is not a sufficient reason to conclude that the stock ascertained by Revenue was correct. In fact in the statement recorded from Shri C.S. Singh on 6.6.99 he clearly stated that only the Factory Manager Shri T.R. Gupta can explain the shortage. The statement of Shri T.R. Gupta was recorded on 24.11.99. He stated that he was not able to explain the shortage but there is no clear admission of shortage or clearance of goods found short. It is in such context that the case is to be looked into to see whether there is any other collateral evidence showing clandestine manufacture and removal. In the case of Alagappa Cements Pvt. Ltd., there was no critical flaw in the method of stock taking as is pointed out in this case. Further the percentage difference was also very high. In the case of International Cylinders Pvt. Ltd. there were other corroborate evidences to prove clandestine removal. Therefore the decisions in those cases cannot be applied to the facts of this case.
7. We notice that Revenue has not been able to adduce any collateral of clandestine removal. Therefore we are of the view that the quantity ascertained in the stock taking is not accurate enough to come to the conclusion that there was manufacture of goods without accounting and clearance of such goods. We also noticed that the internal record dated 29.5.2005 shows goods cleared for despatch as on that date. It is difficult to conclude that the document indicated the physical stock of goods on that day. In view of the above discussions, we are of the view that the benefit of doubt should go to the Appellants.. Therefore, we allow the Appeal filed by the Appellants by setting aside the impugned order.
(Pronounced in Court) (Archana Wadhwa) Member (Judicial) (Mathew John) Member (Technical) RM