Customs, Excise and Gold Tribunal - Mumbai
Ispat Industries Ltd. vs The Commissioner Of Central Excise on 19 July, 2004
ORDER K.D. Mankar, Member (T)
1. The appeal is directed against the order passed by the Commissioner (Appeals), who upheld the order passed by the Joint Commissioner, whereby duty of Rs. 5,06,650/- was confirmed against the appellants under Rule 57I of the Central Excise Rules, 1944, along with imposition of penalty of equivalent amount, and recovery of appropriate interest.
2. The facts in brief are that the appellants availed modvat credit of Central Excise duty paid on various inputs. On referring to the balance sheet for the year 1998-99 and 1999-2000, it was observed that the statutory auditors had made a note in the relevant balance sheets that, there was a shortage in the physical stock in the raw materials/finished goods as compared to the book balance. This shortage was considered to be actual physical shortages in respect of raw materials and finished goods and consequently the aforesaid duty was demanded.
3. Heard both sides.
4. It is claimed by the appellant that the shortage was 0.2% and .0053% respectively of the total sales during the respective years. The shortages have been noticed by the statutory auditors in physical stocks as compared to the stock shown in the books of accounts. Merely because the appellants did not act on the report of the statutory auditors, there could not be a case of suppression. The difference could be on account of (i) book adjustment (ii) calibration error or (iii) due to lack of coordination between different departments. These very grounds were pleaded before the lower authorities
5. The appellants plead that weighments carried Out with reference to the machinery and equipment such as weighbridges installed at various locations can give different results. In terms of the provisions of Weights and Measures (Packaged Commodities) Rules 1977, where the goods are weighting more than 15,000 gms, the maximum permissible limit of tolerance is, 1% of the quantity declared.
6. In this case, I find that stock taking has not been done by the departmental authorities. Reliance has been placed only on the statutory auditors note. The shortage of finished goods or raw materials as recorded in the note, being much below the 1% permissible tolerance prescribed under the Weights & Measures Act, the appellants had made a case that shortages can be attributed to the calibration error of various weighing machines like weigh bridges at different locations, namely, that at suppliers end and that at the end of the appellants. So mere existence of a shortage of raw materials in a situation of this nature cannot lead to an inevitable conclusion and there has been clandestine removal, without independent corroborative evidence indicating clandestine removal. Since no such evidence is on record, the case of clandestine removal, as made out in the orders of the lower authorities cannot be sustained.
7. Therefore, the orders of the lower authorities are set aside and the appeal is allowed with consequential relief, if any, in accordance with the law.
(Pronounced in Court)