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Shri Rathi Steel Limited Versus C.C.E. & S.T. -Meerut-II (Now Hapur)

2017 (11) TMI 977 - CESTAT ALLAHABAD

Validity of SCN - whether under the facts and circumstances, the issue of show cause notice is in accordance with the provisions of the CEA? - Held that: - the issue of show cause notice is bad and against the provisions of the Act. It has been particularly specified in Section 11 A sub Section 2(B), that where an assessee either on its own motion or on being so pointed out by the Departmental Officers, deposit the tax under intimation to the Department, in such case, no show cause notice be iss .....

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dhary, Member (Judicial) Shri Bipin Garg (Advocate) & Ms. Stuti Saggi (Advocate) for Appellant Shri Gyanendra Tripathi, AC(AR) & Shri Pawan Kumar Singh, Supdt. (AR) for Respondent ORDER Per: Anil Choudhary The issue in this appeal filed by the appellant-assessee is whether under the facts and circumstances, the issue of show cause notice is in accordance with the provisions of the Central Excise Act. 2. The brief facts as per the show cause notice dated 15 May, 2008 are that the appellan .....

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ere used by appellant as a part/component in expansion of the factory shed. The said credit appeared to be wrongly taken, as the said goods and had not been utilized in manufacture of final products. Instead had been used for construction of structure and shed in the factory premises. On being so pointed out the appellant reversed the total amount of ₹ 3,54,039/- on the spot, vide Cenvat Account Entry Nos. 2852 and 2853 dated 15 November, 2007. 3. It further appeared that the appellant hav .....

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nder the provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1) (d)(iv) of the Service Tax Rules, 1994. The appellant deposited the tax amount as calculated at ₹ 89,985/- along with ₹ 15,751/- as well as interest vide TR6 Challan dated 26 November, 2007 and Challan dated 21 November, 2007 and gave intimation to the Revenue. 4. Further, the inspection team conducted a stock verification in respect of MS Ingots/Billets, the raw materials, and the finished products M.S. .....

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actual weighment of the goods was not possible as the production in the factory was suspended for the last three days for maintenance work and no labour was available. So, the quantity was ascertained, and weight was as certained by taking the average weight of such ingots on random sampling basis. One piece of ingots was randomly selected from each of the 10 big lots, was actually weighed on the electronic weighing scale installed in the factory premises and total weight thereof was found to be .....

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ted at 257.800 MT. On comparison with the actual stock of raw materials entered in record Form-IV for register, RUD 13, maintained by them, it was observed that consolidated entry for MS Ingots and Billets were made in the raw material register and a stock of 3084.748 MT was shown as closing balance of 15 November, 2007, whereas on physical stock taking, the stock of the above goods, as ascertained was worked out at 3340.044 MT. Therefore, there appear to be shortage of 255.296 MT (3340.044-3084 .....

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ue to actual weight which was arrived at by taking the average weight of each ingot as 111 Kg. Whereas as per the general practice observed by him so far, the average weight of MS Ingots varies between 101 Kg to 120 Kg, depending upon the specification of the MS Ingots suppliers. However, it appeared to Revenue that such shortage was on account of clandestine removal and accordingly, the appellant was required to reverse the Cenvat Credit on the same calculated at ₹ 8,31,893/-. The appella .....

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bars was taken on estimate basis and on totaling the same total weight of stock MS Bars worked out to 3255 MT and on verification from the register it was noticed that the stock register showed the balance 3067.389 MT. Thus the verification showed that the stock of finished goods was in excess of 187.611 MT. On being asked about the difference Shri V.K. Tyagi Manager (Taxation) explained that it is not possible for them to weigh the stock of finished products (being in not condition) after prod .....

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n the basis of his experience in the field. He further stated that the stocktaking is done by way of estimation on the basis of size of the bars bunching and overall size of the particular lot. Similar statement was given by Shri Rout. It appeared to Revenue that the excess stock was liable to confiscation under Rule 25 of CER, as the responsible person of the appellant could not state any convincing information about the shortage. Therefore, there was reasonable belief that the excess stock of .....

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red that the appellant have failed to discharge liability towards payment of Service Tax on the input services received from the overseas service provider. Further, failed to properly account for the raw material and finished goods and also availed inadmissible Cenvat Credit in contravention of the provisions of the Central Excise Rules and the Cenvat Credit Rules and accordingly they were required to show cause why the amount of Cenvat Credit ₹ 8,31,893/- be not demanded and recovered and .....

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n under Rule 25 of CER, 2002 with further proposal to demand Service Tax of ₹ 89,985/- on Reverse Charge Basis on Intellectual Property Services received from abroad with further proposal to impose penalty. 7. The SCN was adjudicated on contest and the proposed demands were confirmed vide Order-in-Original dated 29/05/2009 and equal amount of penalties imposed. Further, excess stock of finished goods 187.611 MT was held liable to confiscation, valued at ₹ 48,38,612/- involving duty o .....

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ons. Further, the redemption fine was reduced from 30 lakhs to ₹ 10 lakhs. Being aggrieved the appellant is before this Tribunal. 8. The learned counsel for the appellant states that from the very plain reading of the show cause notice, it is evident that no element of contumacious conduct, suppression of facts etc. being found attributable to the appellant. The transactions have been found to be duly recorded in the books of accounts maintained in the ordinary course of business. Further, .....

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is due to the method of stock verification as there has been no actual weighment, but only a small sample of 10 ingots/billets were actually weighed and such average weight was multiplied with the number of ingots and the billets. Similarly the stock of finished goods was also done by way of eye estimation. In such manner of verification there has to be allowance for variation. Admittedly, such variation have been found to be only 2 to 3% and as such did not call for any adverse inference agains .....

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