Shri Ashok Kumar Verma, Manager vs C.C.E. & S.T. Meerut-I

[Arising out of Order-in-Appeal No. 39-39/CE/MRT/I/2013 dated 27/02/2013 by the Commissioner of Central Excise (Appeals), Meerut-I].

For approval and signature:

Honble Mr 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. Pawan Alloys and Casting Pvt Ltd.

Shri Ashok Kumar Verma, Manager .Appellants

Vs.

C.C.E. & S.T. Meerut-I .Respondent

Appearance:

Shri Alok Arora, Advocate for the Appellants

Shri R.K. Mishra, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 02.01.2015

FINAL ORDER NO.50018-50019/2015-EX(SM)

Per Ashok Jindal:

The appellant is in appeal against the impugned order wherein demand has been confirmed against them on account of Clandestine removal of goods which was alleged on the basis of investigation conducted in the factory of the appellant on 07.08.2010 wherein shortage of finished goods were found.

2. On 07.08.2010, the preventive officer of the Central Excise Department visited the factory of the appellant and verified the finished stock of MS Ingots. After verification, it was observed that the stock entered in the statutory records is less than the physical quantity found in the factory as recorded in the statutory records. Therefore, it was alleged that appellant has cleared 27.88 metric tonne MS Ingots without payment of duty. Accordingly, a case has been made out against the main appellant and the co appellant for imposing the penalty. It was also found that the appellant received the credit note from the supplier of the goods on the basis of defective quality of the inputs i.e. sponge iron supplied by the supplier of the goods. For which, the demand of Rs. 9086.00 was proposed to be confirmed against the appellant. Both the lower authorities confirmed the demand against the appellant along with interest and penalty on both the appellants have been imposed. Aggrieved from the said orders, the appellants are before me.

3. The ld. Counsel for the appellants submit that the stock taking was done on average basis and it was not done physically as it is coming out from the panchnama itself. Therefore, it cannot be alleged that there was a shortage of finished goods. Moreover, the shortage alleged by the department works out to 8-8.5% only. If the stock taking would have been done on actual weighment basis, there would not be any variation in the statutory records and the physical finished goods. He further submits that there is no corroborative evidence produced by the revenue for clandestine removal of the goods. Therefore, the demands are not sustainable. Consequently, penalties on both the appellants are not imposable. To support his contentions he relied on the decision of this Tribunal in the case of:

(i) Durga Steel Rolling Mills Vs. C.C.E. & S.T. Lucknow-2014 (314) E.L.T. 166 (Tri-Del),

(ii) Simplex Casting Ltd. Vs. C.C.E. Indore-1994 (72) E.L.T. 585 (Tri),

(iii) Sri Jaibalaji Ispat Pvt. Ltd. Vs. C.C.E.-Meerut-I-2014 (310) E.L.T. 556 (Tri-Del),

(iv) Meenakshi Castings Vs. C.C.E. Kanpur-2011 (274) E.L.T. 180 (Allahabad).

4. He further submits that the demand on the discount given by the supplier to the goods is not chargeable to duty, as the discount has been given for the defective quality of the input and that discount does not include any amount towards duty leviable thereon. Therefore, whatever duty has been paid by the appellant he has taken the credit thereof. To Support his contention he relied on the CBEC Circular No.877/15/2008 dated 17.11.2008.

5. On the other hand Ld. AR opposes the contention of the Ld. Counsel and submits that in this case the panchnama clearly records the method of weighment of the finished goods, as explained by the authorized representative of the appellant itself. And on the basis of that method, the weighment was done and no explanation for shortage has been given. Therefore, relying on the decision of this Tribunal in the case of JC Rolling Mills Pvt. Ltd.Vs. C.C.E. Kanpur-2012 (276) E.L.T. 254 (Tri-Del) the duty is payable by the appellant. He further submits that in the case of Bajrang Petro Chemicals Pvt. Ltd. Vs. C.C.E. Kanpur-2014-TIOL-2254-HC-ALL-CX, Honble High Court it was held that in such a situation penalties on both the appellants are imposable.

6. Heard the parties. Considered the submission.

7. It is the case wherein shortage of finished goods was found on the basis of average weighment of MS Ingots as stated in the panchnama. Average basis counting of the MS Ingots was done and there after it was arrived that physical finished goods available in the factory of the appellant was compared with the statutory records and a shortage of 8-8.5% was found. I find that apart from that, no other corroborative evidence has been ascertained in this matter to allege the clandestine removal of the goods. Although the authorized representative of the appellant has admitted the shortage but he has not admitted any fact that any goods have been removed from the factory without payment of duty. Further, I find that in the case of J C Rolling Mills Pvt. Ltd. (Supra) this Tribunal has held that although the authorized signatory was unable to explain the shortage but no further investigation was done. In that scenario charge of clandestine removal of the case is not sustainable. I further find that in that case, the shortage was found on average basis more than 10 percent but in the case in hand the shortage is less than 10 percent.

Therefore, the decision in the case of JC Rolling mills Pvt. Ltd. have no relevance to the facts of this case. Further, I find that in the case of Bajrang Petro Chemicals Pvt. Ltd. (Supra) the issue before the Honble High Court was of imposition of penalty on the appellant under Rule 25 & 26 of the Central Excise Rules, 2002. In that case the Tribunal after considering the detailed facts of the case, imposed the penalty on the appellants and after going through the decision of this Tribunal, the Honble High Court has observed that when the appellants had admitted shortage and paid the duty and had not explained any suitable explanation for the shortage of finished goods, in that scenario it was held by the Honble High Court that it is the admission by the appellant that goods found short have been removed without payment of duty. But the facts of this case has no relevance to the facts of that case as in that case the huge shortage was found during the course of physical verification of the finished goods. Therefore, the said facts are not relevant to the facts of this case. Further, I find that in the case of Durga Steel Rolling Mills (Supra) wherein the shortage was found on average basis, this Tribunal observed that in such a scenario when physical counting of the goods has not taken place charge of Clandestine removal cannot be alleged.

After going through the facts of this case, I observed that in this case the physical verification of the goods has been done on average basis and there is a shortage of only 8-8.5%, further there is no corroborative evidence has been brought on record to allege clandestine removal of the goods. In this scenario, I hold that appellant is not liable to pay duty on the shortage of finished goods found during the course of visit on 07.08.2010.

8. Further, I find that a demand of Rs.9086.00 has been confirmed against the appellant on account of discount given by the supplier for defective quality of inputs.

9. After going through the CBEC Circular No.877/15/2008 dated 17.11.2008, I find that on such discount given by the supplier on defective goods, the appellant is not required to reverse the Cenvat Credit availed on the inputs.

10. Further, I hold that as duty is not payable by the main appellant, therefore the penalties cannot be imposed on both the appellants.

11. With these terms impugned order is set aside, appeals are allowed with consequential relief if any.

(Dictated and pronounced in the open court)

(Ashok Jindal) Member (Judicial)

Bhanu

6

E/58114 & 58115/2013-EX(SM)