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2019 (8) TMI 671

..... s to be based on stock taking in the factory “in the presence of the proper officer”. The said rule makes it explicit that the involvement of the “proper officer” for applicability of the said provision and for initiation of any proceeding for recovery of any duty short paid found on the basis of the said stock taking carried out in the presence of the “proper officer” is an absolute requirement. The materials on record herein undisputedly evidence that there was no involvement of the “proper officer” in the subject annual stock taking carried out on its own by the appellant - There is thus no stock taking under Rule 223A of the said Rules. Hence, the impugned order and the duty demand confirmed thereby under Rule 223A are also sustainable since the stock taking cannot be held to be under Rule 223A of the said Rules. It is also found that there is no denial of the fact that the stocks were ascertained by the appellant on the basis of sectional measurement basis and not on actual weighment basis, but, however, the clearances were effected upon actual weighment basis. In such cases there is bound to be difference in weighments. A case o .....

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..... 223A of the said Rules on shortage found as contained in the Annual Shortage and Surplus Report, arrived on stock verification carried out by the appellant s cost Accounts Section during the material periods, which were duly intimated to the jurisdictional Central Excise authority by the appellant. (c) The said show cause notice resulted in the impugned order passed by the Commissioner of Central Excise, Bolpur Commissionerate, confirming a central excise duty demand of ₹ 1,61,10,218/- under Rule 223A of the said Rules. Penalty of ₹ 2000/- was also imposed upon the appellant under Rule 223A of the said Rules. Being aggrieved thereby the appellant has preferred the instant appeal. 4. We have heard Dr. Samir Chakraborty, Sr. Advocate for the appellant and Mr. A. Roy, A.R. for the Reveneue. 5. The appellant contends as under:- (i) Since the stock verification was not carried out by or in presence of the Proper Officer, the requirement of Rule 223A of the said Rules was not satisfied and, hence, the impugned order passed is ultra vires Rule 223A of the said Rules and, therefore, the impugned order is without jurisdiction and bad in law. In support of this contention the app .....

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..... year 1988-89 can arise or survive in the instant proceeding. Further, consequent to the directions of the Hon ble High Court, he has submitted reconciliation statements, separately for the financial year 1988-1989, 1989-1990-1991 to gether with the stock taking reports for the said period. On the basis of which, he demonstrated the stock shortage within the permissible limit of 2% prescribed by the Board s circular No. 52/79 CX-6 dated 26.10.1979. 6. On behalf of the Revenue, besides reiterating the findings of the Commissioner in the impugned order, it has been submitted that the Commissioner had, on correct appreciation of the materials on record, arrived at the correctness of the shortage figures reflected in the show cause notices and had, following and applying correctly the Board s circular dated October 26, 1979, arrived at the shortage figures and consequent central excise demand, which is sustainable. It was also contended that since the appellant itself had submitted the annual stock taking figures there was no infirmity in the Revenue considering the same and initiating proceeding under Rule 223A of the said Rules since the appellant had not paid the central excise duty .....

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..... tine removal of goods. There is no allegation that the appellant had removed goods in clandestine manner. 3. Stock taking was done by the appellant themselves, without any association of departmental officers. Therefore, stock taking cannot be said to have been conducted in terms of Rule 223A. Stock taking was done by the appellant. Hence, stock taking cannot be said to have been conducted in terms of Rule 223A. 4. Shortage/excess in the annual shortages and surplus report is not actual but notional. The production is recorded on estimation i.e. through sectional measurement basis whereas the dispatch is on actual weighment basis (R.R. Weight). Closing stock is also ascertained on estimation. Shortage arrived at based on estimates. RG-1 is 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. 7.4. The relevant portion of the of the order of the Tribunal in Appeal No. E/55/2003 is reproduced below:- ….5. We have gone through the records of the case carefully. The demand has been issued under Rule 223A covering a peri .....

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..... ties, in estimating the actual stock and in view of the submissions made by the appellants we find that the demand of duty made by adjudicating authority cannot be sustained. Therefore, we allow the appeals with consequent relief. 7.5 In the case of Rourkela Steel Plant (SAIL) Vs. Commissioner C.Ex., Bhubaneswar, 2001 (137) ELT 566 (T-Kol), this Bench of the Tribunal, in the case of another sister unit of the appellant, has also held that based upon the difference shown in the figures in the annual financial accounts entered according to sectional weight and RGI register showing dispatch figurers on Railway Receipt weighment basis, a case of clandestine manufacture and removal cannot be sustained. 7.6 Reference may also be made to the decisions of Rashtrya Ispat Nigam Limited Vs. Commissioner of Customs & C.Ex., 2009(235)ELT 248(T), which has also held that since different basis were adopted for estimating production, consumption and stock taking and clearances discrepancy between stock taking figures and production figures does not lead to the conclusion that the difference has been removed clandestinely. 8. We have also perused the reconciliation statements submitted by the L .....

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