M/S. Jagannath Steel Pvt. Ltd vs C.C.E. Allahabad

[Arising out of Order-in-Original No. 67 to 71/CE/ALLD/2007 dated 28.03.2007 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Allahabad].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

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 should 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 Departmental authorities?

M/s. Jagannath Steel Pvt. Ltd. .Appellants

Vs.

C.C.E. Allahabad .Respondent

Appearance:

Shri Bipin Garg, Advocate for the Appellants

Shri R.K. Mishra, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 21.05.2015

FINAL ORDER NO. 51742/2015-EX(SM)

Per Ashok Jindal:

The appellant is in appeal against the impugned order wherein demand on duty along with interest has been confirmed against the appellant on the allegation that the appellant has manufactured goods and cleared clandestinely. Penalty and equivalent duty is also imposed.

2. The facts of the case are that the appellant is a manufacturer of MS Ingots from sponge iron and iron scrap. A search was conducted in the factory of the appellant on 28.08.2001 and finished goods were verified. It was found that as per statutory records the stock was entered as 300.91 MT and on physical verification it was found 296.050 MT. Therefore, there was a shortage of 4.86 MT of finished goods. Another investigation was conducted in the premises of the appellant on 30.08.2001 wherein verification of stock of raw material i.e. sponge iron took place and it was found that as per books the stock is entered as 311.115 MT whereas it was found 20 MT. Therefore, there was a shortage of 291 MT of sponge iron. It is also alleged that on 13.09.2001 to 15.09.2001 physical counting of iron scrap was done and it was found that there was a shortage of 465.98 MT of duty paid iron scrap and a shortage of 1.005 MT of non duty paid iron sponge. A panchnama was drawn for stock taking done on 30.08.2001 but no panchnama was drawn for stock taking on 28.08.2001 and 13.09.2001 to 15.09.2001. Statement of authorized signatory and Managing Director of the appellant was recorded.

They could not explain satisfactorily the reason for shortage of inputs / finished goods. Therefore, a show cause notice was issued to the appellant to allege that inputs i.e. sponge iron and iron scrap found short were used by the appellant in manufacturing of MS Ingots i.e. final product and same has been cleared clandestinely without payment of duty. Therefore, on the basis of the quantities found short of inputs were calculated as per formula prescribed by the appellant during the course of investigation and it was alleged that quantity of 992.53 of MS Ingots and 26.72 MT of runners and risers was manufactured from the inputs found short and same has been cleared clandestinely without payment of duty. In these set of facts, a show cause notice was issued to demand duty on clandestine removal of finished goods along with interest and equivalent amount of penalty. The order was challenged before this Tribunal by the appellant and the adjudication order was set aside. Matter was remanded back to the adjudicating authority to pass an appropriate order in accordance with law after providing relied upon documents to the appellant.

Thereafter, the relied upon documents were supplied to the appellant and impugned order has been passed. Aggrieved from the said order appellant is before me.

3. The Ld. Counsel appearing on behalf of the appellant submits that in this case no panchnama was drawn for weighment of finished goods as well as weighment of iron scrap. Although weighment of iron scrap was continued for three days i.e. 13.09.2001 to 15.09.2001 but no weighment slip / panchnama was supplied to the appellant to allege that there was a shortage of 465.980 MT of duty paid scrap and 1.005 MT of non duty paid scrap. Therefore, allegation of shortage of iron scrap is not justified. It is further submitted that to manufacture MS Ingots the appellant requires sponge iron as well as iron scrap as inputs. Therefore, by any means it cannot be alleged that appellant has used inputs for manufacturing of final product i.e. MS Ingots in the absence of any evidence on record on shortage of iron scrap. Therefore, allegation of Revenue that the short found inputs have been used by the appellant for manufacturing activity is not sustainable. Consequently, impugned order is required to be set aside.

4. On the other hand, Ld. AR supported the impugned order and submits that as per the show cause notice as well as the impugned order it is coming out that weighment has been done during the period 13.09.2001 to 15.09.2001 and on the basis of the weighment shortage was deducted and iron scrap and sponge iron both were found short. If these inputs are short that have been used by the appellant in manufacturing final product i.e. MS Ingots. In these circumstances, duty has been rightly demanded from the appellant. He further submits that as there was a shortage of goods therefore duty is rightly demandable as per the decision of this Tribunal in the case of Gulabchand Silk Mills Pvt. Ltd. Vs. CCE Hyderabad-2005 (184) ELT 263 (Tri-Bang), in the case of M/s. Bajrang Petro Chemicals (P) Ltd. Vs. CCE Kanpur-2014-TIOL-2254-HC-ALL-CX, CCE & ST Daman Vs. Nissan Thermoware-2011 (266) ELT 45 (Guj).

5. Heard the parties. Considered the submissions.

6. In this case it is admitted position that weighment was done on three occasions. But only panchnama was drawn for the weighment done on 30.08.2001 wherein sponge iron was found short of 291 MT. For the weighment done on 28.08.2001 and 13.09.2001 to 15.09.2001 no panchnama was drawn. Therefore, in the absence of panchnama or any other evidence on record it cannot be alleged that there was shortage of finished goods or iron scrap at the time of weighment of said goods. If there was shortage, Revenue could have produced the panchnama as well as weighment slip as they have done for the shortage deducted on 30.08.2001. Therefore, allegation of shortage of finished goods on 28.08.2001 and weighment done during the period of 13.09.2001 to 15.09.2001 is not sustainable in the absence of any reliable evidence. Further, the Revenue could have made a case against the appellant for shortage of sponge iron deducted on 30.08.2001 that either they have not received the sponge iron or same has been cleared as such without reversal of Cenvat Credit. But Revenue has not opted that route to demand duty from the appellant.

The allegation in the show cause notice is that the said sponge iron has been used by the appellant for manufacturing final product. Admittedly, to manufacture final product i.e. MS Ingots, the sponge iron as well as iron scrap is required. But as per the evidence on record there is no shortage of iron scrap. Therefore, the allegation of manufacturing MS Ingots of the sponge iron used for manufacturing the same is not sustainable in the absence of shortage of iron scrap. In these circumstances, the allegation against the appellant is only on the basis of presumptions and assumptions. Duty cannot be demanded on allegations based on assumption and presumption. In these circumstances, I hold that the investigation is weak on the part of the revenue. Therefore, allegation against the appellant is not sustainable. Further, I find that Ld. AR has relied on certain case laws. In the case of M/s. Bajrang Petro Chemicals (P) Ltd. (Supra) there was a shortage of finished goods but that case is not here. Here the shortage found short on input which ultimately alleged to be used in manufacturing of final product.

Therefore, the said case law is not relevant. Further, in the case of Gulabchand Silk Mills Pvt. Ltd. (Supra) there was excess goods found in the factory and same cannot be explained by the assessee. Therefore, it was held that the excess stock is meant for clandestine clearance but that is not the case here. Further, I find that in the case of Nissan Thermoware (P) Ltd. (Supra) relied upon by the appellant the shortage of input which has been admitted by the director cannot be ground to demand duty for holding that same has been used in manufacturing of goods removed clandestinely. Therefore, I hold that the revenue failed to prove that the sponge iron found short was used in manufacturing of final product. Therefore, demand is not sustainable.

7. Consequently, impugned order is set aside. Appeal is allowed with consequential relief if any.

(Dictated and pronounced in the open court)

(Ashok Jindal) Member (Judicial)

Bhanu

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E/2528/2007-EX(SM)