2024 (3) TMI 687 - CESTAT HYDERABAD

Clandestine removal - alleged shortage of goods said to be found on the basis of comparison of the quantity accounted in SAP system - sole ground based on which the demand has been confirmed by the Commissioner is that there was certain difference in quantity of fruit pulp accounted for in RG1 Register (defunct) and those physically available in the factory premises, when compared with the stock accounted for in SAP system - Extended period of limitation - penalties - HELD THAT:- The Department’s claim is that differential quantity between the two has been considered as clandestinely removed by the Appellants and the demand has been confirmed accordingly. It is an admitted fact that the Appellants were maintaining all their records, including statutory records relating to production and clearance of the final products, in SAP system. Inter alia, the production as well as clearances of fruit pulp was accounted for on day-to-day basis in said SAP system and this fact was brought to the notice of the Officers, who conducted the stock taking, on the very first day of their visit to the factory and subsequently, by way of various correspondence exchanged by the Appellants with the Commissioner.

It is found that despite repeated requests, the Department preferred to compare the physical stock with defunct RG-1 stock, even though correct stock, on day-to-day basis, was maintained by the Appellants in their SAP system - the records maintained in SAP system cannot be manipulated easily. For the reason best known to department, no attempt was made by department to cross check the veracity of averments made by appellant regarding maintenance of record on SAP systems was made.

When the Dept. did not accept the records maintained by the Appellants in their SAP system while issuing the SCNs for confiscation of excess stock of finished goods claimed to be found by the Officers, then the Dept. cannot take an altogether different stand and rely upon the records maintained in SAP system and compare it with so called RG-1 for confirming demand on the alleged shortage of goods - the claim of the Appellants that if the balance quantity recorded in SAP system and correct physical stock available is compared, there was no excess stock and rather there was negligible shortage due to leakage of drums, date expired stock, puffing, handling/storage loss, etc.

When physical stock verification carried out by the Officers was not fool proof and there were anomalies, the benefit of doubt should be extended to the assessee. Further, the allegation of clandestine removal of goods cannot be based on assumption or surmises and the Department should prove clandestine removal with cogent and tangible evidences - It is an admitted fact that no incriminating documents were found or recovered by the Officers during their both visits to the factories and the so called shortage was alleged solely based on physical verification and method adopted by them for comparison of figures shown in RG1 Register/ER1 Returns and in SAP system, which appears to be not a correct method, when the Dept. was taking different stand at different points of time.

In the facts of the case, the SAP alone was the proper account being maintained and there cannot be any comparison with so called RG1 register either for excess or for shortage. The physical stock taking is a verifiable fact which needed to be compared with production and clearance of pulp as reflected in SAP system.

The computation of demand is not proper, as the Dept. has taken the total production accounted in SAP system, subtracted the quantum of production accounted in RG1 & so called quantity physically found in the factory at the time of stock verification, and the differential quantity was claimed to be shortage and alleged to be cleared clandestinely, which is not correct, as the Dept. should have compared physical stock with the details accounted in SAP system. Taking all the aspects of the case and the evidences, it is found that the Department has not been able to conclusively prove clandestine removal of goods.

So far as valuation adopted by the Appellants for stock transfer of fruit pulp to their sister unit is concerned, it is found that the same is correct, as they have adopted comparable price and no favoured treatment was afforded and, hence, differential duty confirmed in the impugned Order, is not sustainable - Therefore, entire exercise also leads to revenue neutral situation and there was no inducement for the Appellants to undervalue the fruit pulp stock transferred by them to their sister units. Therefore, the demand confirmed on this count is not sustainable and deserves to be set aside.

Penalties - HELD THAT:- In the absence of any conscious and deliberate suppression of facts or wilful mis-declaration and also in the absence of mens rea, penalty is not imposable. Therefore, the penalty imposed on the Appellant-company deserves to the set aside. Since Shri Sameer Sharma, Associate Vice President of the Company, has acted as an employee, in the ordinary course of discharging his assignments, and he could not have unduly gained anything personally, penalties imposed on Shri Sameer Sharma is not sustainable and deserves to be set aside.

The impugned Orders are not sustainable on merits - Appeal allowed.