At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi
By, THE HONOURABLE MRS. JUSTICE ARCHANA WADHWA
By, MEMBER (JUDICIAL)
For the Appellants: R.K. Gupta, AR. For the Respondent: A.K. Dixit, Advocate.
Per Archana Wadhwa (for the Bench):
1. Being aggrieved with the order passed by Commissioner (Appeals) vide which he has set aside the order of the original adjudicating authority, Revenue has filed the present appeal.
2. I have heard Shri Shri R.K. Gupta, learned AR appearing for the revenue and Shri A.K. Dixit, learned Advocate appearing for the respondent.
3. As per facts on record, the respondents manufacture the M.S.Ingots from scrap. On 27.11.07, their factory was visited by the Central Excise Officers and stock checking was conducted. At that time, as against the recorded balance of 1576.12 M.T. in R.G.I Register, the physical stock of M.S.Ingot was found to be 1532.923 MT. and thus there was shortage of 43.197 MT. involving duty of Rs.117461/-. On enquiry, Sh. Nathan Lal Chowdhary, Authorised Signatory of M/s. Sigma Castings Pvt. Ltd. could not give any explanation for the shortage. In his statement he stated that the shortage might be due to carelessness of the staff and paid the entire amount of Rs.117461/- vide challan No.187 dt.30.11.07. Thereafter a show cause notice was issued for confirming the duty demand and imposition of penalty. Dy. Commissioner vide order-in-original dt.16.12.08 confirmed the duty demand alongwith interest and imposed penalty of equal amount on the respondent under Section 11AC. On appeal by the respondent against this order of the Dy. Commissioner, the Commissioner vide order-in-appeal dated 1.5.09 accepted the respondents contention that alleged shortage was not real for the reason that stock had been determined through eye estimation and set aside the entire duty demand and penalty.
4. Hence the present appeal.
5. After going through the impugned order, I find that Commissioner (Appeals) has held in favour of the respondents, by observing as under:-
In this connection, I observe that merely because the shortage has been admitted by the respondents it does not mean that there was really a shortage. Shortage of stock needs to be verified with precision. On perusal of Panchnama and its annexures, I observe that no remark was made on the stock verification report as to how the physical stock taking was conducted as also no weightment records attached to the panchnama and since at adjudication stage the appellants contested such stock verification, in absence of proper physical weighment, errors may creep in the eye estimation of huge quantity of stock i.e. 1532.923 MT of MS ingots only in addition to huge quantity of finished product. Such a verification as done in this case is to be called on eye estimation. In this context I would like to mention that the method of stock taking adopted by the officers at best can lead to suspicion of excess stock but cannot be a substitute for the proof of shortage unless the Revenue is in a position to clearly demonstrate the fact of shortage in stock through physical weighment of entire stock, the allegation of shortage in stock cannot be sustained. In this connection, I find that Honble CESTAT in following cases have observed that goods found in excess on the basis of eye estimation and not on the basis of physical weighment is not sustainable under law.
6. He also observed that the charges of clandestine removal are serious charges and in the absence of any evidence of removal of goods mere shortages cannot be held to be a justifiable ground for confirmation of duty. He relied upon various Tribunal’s decision to that effect.
7. I find that apart from the shortages, which are also contested by the assessee, inasmuch as there was no proper stock taking, there is no evidence showing the manufacture of the goods and their clearances without payment of duty. The clandestine removal being a positive act, the burden of proving the same is on the Revenue and cannot be discharged on the basis of conjectures and assumptions. I fully agree with the findings arrived at by the Commissione
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r (Appeals) that the effect of shortages by itself cannot lead to the findings of clandestine removal, especially when such act does not stand accepted by the assessee. The statement of the respondent’s authorised representative, has nowhere accepted that such shortages are on account of clandestine removal.8. In view of the above, I find no infirmity in the order of Commissioner (Appeals), Revenue’s appeal is accordingly rejected.