2017 (2) TMI 1139 - AT - Central Excise

Shortage of goods - demand - CENVAT credit on raw material found short - duty on finished goods found short - penalty - the finished goods manufactured on a particular day was not entered in RG-1 even after same were loaded in the tankers meant for clearances for such goods - Held that - there is shortage of inputs and during the process there are some process losses to the tune of 0.5% to 0.9%. This Tribunal in appellants own case CASTROL INDIA LTD. Versus COMMISSIONER OF C. EX 2007 (10) TMI 91 - CESTAT MUMBAI allowed the process loss up to the 0.5% and appellant has also intimated to the department with regard to the processes loss in 1999 itself - the duty has been paid on losses beyond permissible limits. In that circumstances it cannot be alleged that the appellant has availed excess Cenvat credit with intent to evade payment of duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand in account of shortages against the appellant.
2. Imposition of penalty on the appellant for not recording shortages in statutory records.

Analysis:
1. The appellant, engaged in manufacturing lubricating oils, was found to have discrepancies in stock levels between physical stock and computer records, leading to shortages not reflected in Central Excise Records. The show cause notice was issued demanding Cenvat Credit for raw material shortages and duty for finished goods shortages. The adjudication considered a process loss of 0.5% but confirmed the demand and penalty equal to the demand.

2. The appellant contested the penalty, arguing no mala fide intention for not recording shortages in statutory records. The appellant had previously informed the department about process losses in 1999. The Tribunal noted shortages and process losses of 0.5% to 0.9%, with previous allowance for process loss up to 0.5%. The duty was paid on losses beyond permissible limits, indicating no intent to evade payment. Consequently, the penalty was deemed not imposable, affirming the demand but setting aside the penalty.

Overall, the appeal was disposed of with the confirmation of the demand regarding shortages but the setting aside of the penalty on the appellant.