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2015 (11) TMI 669 - CESTAT BANGALORE

2015 (11) TMI 669 - CESTAT BANGALORE - 2015 (325) E.L.T. 362 (Tri. - Bang.) - Denial of CENVAT Credit - Penalty u/s 11AC - Held that:- Appellants are using different types of raw material viz. MS Scrap, Pig Iron, Sponge Iron etc. However separate raw-materials account for each item admittedly has not been maintained at all. It is strange and surprising that raw-material account was maintained in a consolidated manner. The appellants have not disputed the short found at the time of stock taking w .....

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take any steps whatsoever to check whether the accounting is being done correctly or not. The method adopted by the assessee for maintaining consolidated raw material account itself is a strange method of accounting. It was also admitted that from July 2008 onwards they were not even maintaining the record of use of raw materials on which cenvat credit has been taken.

The claim that raw material accounting was done on a hypothetical basis is not at all logical in view of the fact th .....

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e Central Excise In-charge, the production and consumption figures were given by the melter. If this is so there could not be any shortage at all. Under these circumstances no other conclusion can be reached other than the conclusion that appellant has failed to account for the raw material on which cenvat credit has been taken and show that the same has been used for manufacture of finished goods on which duty has been paid. This is an obligation cast on the manufacturers who take cenvat credit .....

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thy, Technical Member For the Petitioner : Mr. G. Natarajan, Advocate For the Respondent : Dr. L. Dendem, AR ORDER Per: B.S.V. MURTHY The appellant manufactures MS Ingots falling under CETH 72061090 of the first schedule to the Central Excise Tariff Act 1985. They were availing cenvat credit of central excise duty paid on inputs viz. Sponge iron (in lumps and in granules form) Pig iron in granules form, PCM Jam, MS Scrap etc. besides availing cenvat credit of central excise duty paid on capital .....

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d and on completion of proceedings in accordance with law, demand for cenvat credit of ₹ 41,90,522/- (Rupees Forty One Lakhs Ninety Thousand Five Hundred and Twenty Two only) being the credit of duty paid on 1672.423 MTs of raw materials found short was demanded with interest. Besides demanding cenvat credit with interest, penalty under Section 11AC of Central Excise Act 1944 amounting to ₹ 41,90,522/- (Rupees Forty One Lakhs Ninety Thousand Five Hundred and Twenty Two only) was impo .....

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everyday. While calculating the output, they had provided for burning loss of 2 to 3% whereas the actual burning loss was much more. He draws our attention to the technical opinion of expert and submitted that the burning loss can be around 25%. 4.Further he submits that right from the beginning this has been the contention of the appellant. There is no evidence of any diversion of raw-material and officers have not produced any evidence to show the sale of raw-material or the finished products .....

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rtage has not been disputed. He also submits that appellants did not maintain raw materials account properly at all and therefore demand is sustainable. 6. We have considered the submissions made by both the sides. On going through the records and submissions we find that the appellants are using different types of raw material viz. MS Scrap, Pig Iron, Sponge Iron etc. However separate raw-materials account for each item admittedly has not been maintained at all. It is strange and surprising tha .....

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f shows that in spite of the huge difference between the actual raw material available and the stock as per the Register, the assessee did not take any steps whatsoever to check whether the accounting is being done correctly or not. The method adopted by the assessee for maintaining consolidated raw material account itself is a strange method of accounting. It was also admitted that from July 2008 onwards they were not even maintaining the record of use of raw materials on which cenvat credit ha .....

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rs submissions are taken into account, the total stock comes to only about 200 tonnes which shows that even the melter underestimated the quantity available. Shri Govind Kumar, Managing Director on 25.11.2008 at the conclusion of the stock verification, had stated that right from the inception of the company burning loss was accounted at 2-3% and actual burning loss would be 18 to 25%. He also stated that they had not taken physical stock of the raw materials since the inception of the factory i .....

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etc. can be accepted, when there is huge difference as in the case before us now, it is surprising and strange that the appellant did not take any remedial steps to correct the account if it is due to only accounting error. Other than an expert opinion saying that there can be burning loss, there is no other evidence to show that the stock account was maintained properly. In the show-cause notice it was also stated that suddenly there was drastic reduction in the raw materials balance between th .....

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ity of loss is only 3.78% compared to the total quantity received by them over a period of 5 years. However this is not a proper method of looking at the stock. What is to be seen is what was the difference between the closing balance and the stock available at the time of verification and when there is a huge difference it shows that the appellants had not at all considered proper maintenance of records necessary. There is no explanation forthcoming as to why the appellant failed to account for .....

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