TMI Blog2016 (9) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... erials, excess consumption of power etc. In this present case before us even the Appellant has not admitted to have made any clearances clandestinely. The finished goods are cleared by the Appellant on actual weighment basis in containers/trucks and it is not the case of the Revenue that any less quantity is cleared by comparing final goods quantities shown in the clearance documents and the DSA quantity. In view of the observations and settled proposition of law, case of the department regarding clandestine removal is not sustainable against the Appellants, except shortage of 6.750 MT of Silicon Manganese admitted by the Appellants. So far as imposition of penalties upon the Appellants are concerned, it is observed that once clandestine removal case booked against the Appellants does not sustain then there is no point in imposing penalties upon the Appellants. Accordingly Appeals filed by the Appellants are required to be allowed, except to the extent contained in the next paragraph. So far as shortage of 6.750 MT of Silico Manganese, in packed condition is concerned, Appellants in Appeal accepted this shortage. Further in their reply to the show cause notice, before the Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as per their practice bagged quantity is entered into DSA on actual weighment basis. That loose ferro-alloys are carried to storing place and are weighed on the basis of two sizes of baskets one having 20 kgs. capacity and other having 30 kgs. capacity. That weight of material contained in 20 kgs. 30 kgs. baskets is a tested method adopted by the Appellant over time to calculate the weight of loose ferro-alloys which is reflected in the DSA on daily basis and is called sorted production. That the shape and size of sorted ferro alloys greatly vary. Learned Senior Advocate made the Bench go through photographs of such materials copy of which is at page-95 of the Appeal papers. That due to great variation in the shape, size and density of material in the lumps of Ferro Alloys heavier lumps have a tendency to settle at the bottom of the stacks/heaps and lighter lumps/pieces of ferro-alloys remain towards the top. That such heaps/stacks in the storing area do not have a clear or well defined geometrical shape and it is practically impossible to get proper dimensions to ascertain volume and height. That each heap/stack is a heterogenous matter having lumps of material with different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been added as per the show cause notice. That Income Tax inventory was an estimation and the method adopted for Income Tax inventory is not made available to the Appellant. That Appellant requested for cross-examination of Income Tax officers who prepared inventory but the same was not allowed. That Central Excise authorities found stock of Ferro Manganese as matching with DSA as per inventory prepared on 06.12.2007. (iii) That unsorted materials of ferro-alloys cannot be considered because the same has not reached DSA stage or RG-1 stage as done by the Income Tax inventory. That Central Excise officers also expressed no interest in physical stock of unsorted production while taking their stock-taking. That there was no shortage of any final products except 6.750 MT of packed Silico Manganese which was also an accounting/clerical error. (iv) That there is not even an iota of evidence that any clandestine clearance is made by his clients as final sale is made on actual weighment basis when DSA goods are loaded onto the containers or trucks carrying finished goods. (v) That as per one opinion dated 13.09.2010, submitted by the Appellant to the Adjudicating authority as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Hemanta Bhattacharjee in answer to Question No.6 9 of his statement has accepted the shortages calculated by Income Tax and DGCEI authorities and has not been retracted. Learned AR made the Bench go through para 30 to 40 of Order-in-Original dated 13.10.2010 to argue that Appellants have no case. Learned AR thus strongly defended the order passed by the Adjudicating authority. 5. Heard both sides and perused the case records. The only issue required to be decided in these Appeals is whether stock-taking of goods manufactured by the Appellant has been correctly done by the officers of DGCEI and the Income Tax authorities to determine shortages and clandestine removal of goods. Adjudicating authority in the Order-in-Original dated 13.10.2010, in para-32 to 34, has gone by the logic that if Appellant can adopt 20 kgs./30 kgs. bucket method to determine weight of the finished goods then why not the method adopted by DGCEI. Though not discussed by the Adjudicating authority in the Order-in-Original dated 13.10.2010 but still learned AR appearing for the Revenue tried to fortify department s case by arguing that Accounts Manager of the Appellants admitted to the shortages worke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause notice could have asked for cross-examination of the said Chartered Engineer. Alternately the cross-examination asked by the Appellant on stock-taking estimations done could have been provided. In the absence of cross-examination the evidenciary value of a document/statement is lost as per relied upon case law Satpushp Steels (P) Ltd. v. Commr. C.Ex., Jaipur (supra) and settled proposition of law. Department could have estimated the stock on 20 kg./30 kg. capacity buckets as was being adopted by the Appellant but choose to adopt a different estimation method. Findings given by the Adjudicating authority in para-38 of the Order-in-Original dated 13.10.2010 are highly illogical as nothing has been brought on record as to what is the DSA/RG-1 stage prescribed by the department. Secondly, department also preferred to calculate finished goods stocks of ferro alloys as per inventory dated 06.12.2007 and nothing was mentioned about the unsorted stocks of ferro alloys. In view of these observations the stock takings and calculations done by the department are not authentic and cannot be made the basis for confirmation of demand against the Appellants. Further the method adopted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal of finished goods cannot be sustained. A plethora of case laws hold that provisions of Section 11A would apply in making demands of duty on deficiencies found during stock taking. The appellants based many reasons for discrepancies between the RG-1 and the physical stock. For example, the RG-1 is only based on estimated production and not based on actual weighment. Physical stock is also based on estimation of weight on the basis of volumetric estimate and conversion to theoretic weight based on sectional weight. A comparison between two estimation is inherently inaccurate. Losses like cutting, grinding and milling, scale loss after heat treatment and straightening, reprocessing after inspection at various stage of manufacture are not recorded in RG-1. Rejections are not recorded while accounting for quantity produced or issued in the form of sections and ingots. Shortage is inflated due to errors in taking opening balance as on 1-4-1998 and physical stock on 31-3-2001. Considering the practical difficulties, in estimating the actual stock and in view of the submissions made by the appellants, we find that the demand of duty made by the adjudicating authority cannot be sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v. CCE - 1995 (76) E.L.T. 197. 7.1 Above case law has been upheld by Apex Court by dismissing C.A. No.D 623 of 2003 filed by the department as reported in Commissioner vs. Durga Trading Company [2003 (157) ELT A 315 (SC)]. 7.2 In this present case before us even the Appellant has not admitted to have made any clearances clandestinely. The finished goods are cleared by the Appellant on actual weighment basis in containers/trucks and it is not the case of the Revenue that any less quantity is cleared by comparing final goods quantities shown in the clearance documents and the DSA quantity. 8. In view of the observations contained in paras 5 to 7.2 above, and settled proposition of law case of the department regarding clandestine removal is not sustainable against the Appellants, except shortage of 6.750 MT of Silicon Manganese admitted by the Appellants. So far as imposition of penalties upon the Appellants are concerned, it is observed that once clandestine removal case booked against the Appellants does not sustain then there is no point in imposing penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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