2017 (11) TMI 1736 - AT - Central Excise

Clandestine removal - Confiscation of excess stock - Rule 25(1) of Central Excise Rules 2002 - Held that - It is apparent on the face of record that no physical weighment of the finished goods was done and only some bundles of bars of different sizes were weighed and thereafter the number of bundles was counted and multiplied with sample weight which is clear cut case of eye estimation - In such manner of stock taking by way of estimation the variation of about 10% is normal - appeal allowed - decided in favor of appellant.

Issues:
1. Confiscation of excess stock of finished goods found during inspection.
2. Imposition of fine and penalty under Rule 25(1) of Central Excise Rules, 2002.
3. Admissibility of physical verification method used to determine excess stock.
4. Validity of show cause notice and penalty under Section 11AC of the Act.
5. Appeal before Commissioner (Appeals) and subsequent appeal before the Tribunal.

Analysis:
1. The primary issue in this appeal was the confiscation of excess stock of finished goods discovered during an inspection. The recorded stock of CTD/TMT bars was 943.515 MT, but the physical stock found was 1068.987 MT, indicating an excess of 125 MT. The appellant's excess stock was confiscated with the option to redeem the goods upon payment of a fine and penalty under Rule 25(1) of the Central Excise Rules, 2002.

2. The brief facts revealed that during an investigation in November 2008, it was observed that CTD/TMT bars were stored in open areas of the factory in bundles. The factory manager proposed a method of physical verification by weighing representative samples of each size of bars to determine the total stock. This method resulted in the identification of an excess stock of 125 MT. The Revenue alleged that this excess stock was not accounted for in contravention of Rule 10 of the Central Excise Rules, 2002, with an intent to clear clandestinely. A penalty under Section 11AC of the Act was also proposed.

3. The appellant, aggrieved by the decision, appealed before the Commissioner (Appeals) who rejected the appeal. Subsequently, the appellant filed the present appeal before the Tribunal challenging the confiscation and penalties imposed.

4. Upon hearing both parties, the Tribunal considered the method of physical verification used, which involved estimating the stock based on a sample of bundles. The Tribunal noted that no physical weighment of the finished goods was conducted, and the method used was a form of eye estimation. It was observed that no adverse material was found against the appellant regarding clandestine removal, and the stock variation of about 10% was deemed normal. The Tribunal concluded that the show cause notice based on eye estimation was not maintainable, setting aside the impugned order.

5. Ultimately, the Tribunal allowed the appeal, determining that the appellant was entitled to consequential benefits. The judgment highlighted the importance of proper stock verification methods and the necessity for concrete evidence to support allegations of wrongdoing in excise matters.

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