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M/s Kumar Industries Versus C.C.E. Lucknow

Demand - Differential duty - unexplained shortage of raw materials - stock verification method adopted - Held that:- it is found that in the method of stock verification adopted, there is bound to be variation. Further the variation found is about 10% in the case of raw material and less than 5% in the stock of finished goods which I hold as normal variation in such method of calculation. Secondly it is found that the appellant had given cogent explanation regarding the shortage of raw material .....

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ent for the Appellant: Shri A.P. Mathur, Advocate Present for the Respondent: Shri Sanjay Hasija ORDER The appellant is in appeal against Order-in-Appeal dated 10/10/14 by which duty has been confirmed on the stock of raw material and finished goods found short along with penalty, on the date of inspection. 2. The brief facts are that the appellant is a manufacturer of MS angles, flats etc. and the raw material is MS ingots. An inspection was conducted on 01/8/2012 in the factory premises. The o .....

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ent was drawn and in the stock of finished goods of MS Bar against opening stock of 109.215 M. T. stock was worked out at 103.950 M.T, thus the difference or shortage of 5.265 M.T. So far the stock of raw material - MS Ingots the opening balance on the day was 380.370 M.T and the same was calculated at 350.140 M. T. giving a shortage or difference of 30.230 M.T. In the statement recorded on the date of inspection the Partner present stated that he is satisfied with the method of stock taking but .....

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not been recorded in the stock records and the average rate of the same is almost equal to the difference in the stock of raw materials. Accordingly he urged that there is no shortage in the stock of raw material and paid the duty demanded on M.S. Bars, ₹ 23,232/- on 6/8/12. It is further the fact on record that there was no electricity since 31/7/12 and hence the production was lying stand still at the time of inspection. 3. Show Cause Notice dated 26/2/13 was issued as it appeared to rev .....

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as taken gives only some approximate figure and there is bound to be variation and as such no adverse inference can be drawn for the variation which is normal. In the case of finished goods the variation is less than 5% and in the case of raw material although the variation in adequately explained the same is not more than 10%. The SCN was adjudicated and the proposed demand confirmed and equal amount of penalty was imposed under Rule 25 of Central Excise Rules and read with Section 11 AC of the .....

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factory of the appellant on 31/7/12 and 01/8/12 due non availability of electricity and accordingly there would not be any possibility of feeding the electric furnace with MS ingots, as claimed by the appellant. 4. Being aggrieved the appellant is before this Tribunal. The Id. Counsel Shri A.P. Mathur, urges that there is bound to be variation in the method of stock taking adopted by the physical verification. It is admitted fact that 10 pieces of finished goods or raw material were weighed and .....

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in weight at 30.230 M. T. Further without verification of the fact asserted by the appellant the Adjudicating Authority and the Id. Commissioner have erred in rejecting the cogent explanation without actual verification of the same. He further urges that in view of the possibility of variation in such method of verification of stock the difference found is normal variation and accordingly prays for setting aside the impugned order with consequential relief. The Id. Counsel further relies on the .....

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. Casting Private Ltd. Vs. Commissioner of Central Excise and Service Tax Meerut-I 2015 (318) E.L.T. 433 (Tri.-Del.) wherein also in the case of shortage of finished goods and inputs, without the there being any evidence of clandestine removal, it was held that penalty is not imposable. 5. The learnedly AR for revenue relies on the impugned order. The learnedly AR further relies on the ruling of the Honourable Allahabad High Court in the case of Bajrang Petro Chemicals (P) Ltd. Vs. Commissioner .....

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ence can be drawn that the same have been removed without payment of duty. The learnedly AR also relies on the ruling of Madras High Court in the case of Goyal Ispat Ltd. reported in 2015 (324) E.L.T. 392 (Mad.) wherein the case of stock taking conducted on the basis of eye estimation, the question being considered was, whether stock taking done on the basis of eye estimation was proper. The High Court did not accept the findings of the Commissioner (Appeals) that the shortage could not be ascer .....

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ds, recording the shortage of goods which had been done in presence of an independent witness and such shortage was supported by the unretracted statement of the manager. It was held that the Tribunal was correct in confirming the order of penalty. Under similar facts and circumstances of stock valuation done on eye estimation and the assessee had not protested and paid the duty, this Tribunal in the case of Shivkripa Ispat Pvt. Ltd. Vs. Commissioner of Central Excise 2010 to (262) E.L.T. 477 (T .....

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