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2023 (5) TMI 1022 - AT - Central Excise
Clandestine Removal - shortage of stock - Demand of differential value of the stock - various differences in the physical stock of finished/semi-finished goods shown in their statement when compared with the adjusted RG-1 opening balance of stock of finished/semi-finished goods for the years 2001-02, 2002-2003 and 2003-2004 - validity of SCN - parameters relied upon by the authorities in the show-cause notice and the parameters relied upon by the learned Commissioner are at variance - HELD THAT:- The show-cause notices though demanded duty beyond the normal period fail to invoke proviso to Section 11A but the learned Commissioner in his impugned order invoked proviso to Section 11A and imposed penalty under Section 11AC which is beyond the scope of show-cause notices. In this regard, the Hon’ble Supreme Court in case of COMMR. OF CENTRAL EXCISE & CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. & ORS. [2015 (12) TMI 670 - SUPREME COURT] has held that the genuineness of the price at which the physician samples were sold by the assessee to the distributors was not even doubted. It is only on the ground that the goods were not actually sold by the distributors to the physicians, which was the ground on which it was contended that the case was not covered under Section 4(1)(a).
The Commissioner in present case has held that In fact, the genuineness of the price at which the physician samples were sold by the assessee to the distributors was not even doubted. It is only on the ground that the goods were not actually sold by the distributors to the physicians, which was the ground on which it was contended that the case was not covered under Section 4(1)(a) - further they held that In the instant case, discrepancies between the accounts (RG1) and the audited accounts have been noticed in respect of closing stocks. Since it is inherent from the very nature of estimation of stocks in steel factories that there will be variations between what is reflected in the RG1 and what is actually found, no malafide can be attributed in the discrepancies or inaccuracies found between the two figures which are based on estimates. In the absence of any mala fide, confiscation of goods found in excess stock and imposition of penalty is not warranted.
In spite of these observations, he proceeds to impose invoke proviso to section 11A and impose penalty under Section 11AC which is legally not sustainable.
The appellant’s in their own case reported in STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF C. EX., MYSORE [2005 (10) TMI 181 - CESTAT, BANGALORE], the Tribunal has held that the discrepancy between the RG1 stock and the physical stock are based on the estimated production and not on actual weighment. Comparison between two estimations is inherently inaccurate. Because of these shortages, if any, is inflated due to errors in taking opening balance and physical stock. Considering the practical difficulties in estimating the actual stock and in view of the submissions made by the appellant, the Tribunal had set aside the impugned order.
In the case of ROURKELA STEEL PLANT [SAIL] VERSUS COMMISSIONER OF C. EX., BHUBANESWAR [2000 (7) TMI 726 - CEGAT, KOLKATA], the Tribunal had held that even if there are differences in the stock taking and the shortages are found, the duty can be demanded only when they are removed from the factory. The findings on the clandestine manufacture and removal cannot sustain against the appellants as Revenue has not provide any proof of clandestine removal. Accordingly, demand was set aside.
In the present appeal also even if the shortages are to be accepted, there is no iota of evidence either in the show-cause notices or in the impugned order to prove that these goods were clandestinely removed.
The demands are set aside and accordingly, penalty is also set aside - Appeal allowed.