2013 (8) TMI 384 - AT - Central Excise

Tribunal upholds order, rejects Cenvat credit demand & penalties for destroyed goods. Revenue's appeal partially allowed.

The Tribunal upheld most of the impugned order, except for the Cenvat credit demand and penalty related to the 9,000 kg. of wires and strips allegedly ... Clandestine removal - Cenvat credit reversal - stock reconciliation with RG-23A Pt. I - presumptive consumption based on GTP specifications - loss of finished goods in fire and remission of duty - penalty under Rule 57-I(4)Clandestine removal - stock reconciliation with RG-23A Pt. I - Duty demand in respect of 10 finished transformers allegedly found short at the time of officers' visit. - HELD THAT: - The Panchnama and the statement recorded under Section 14 show that the respondent's representative explained the absence of ten transformers by stating that they had been put in the oven for reovening and the oven was not opened. The officers did not verify the claim by opening the oven, and absence of an entry in RG-1 for transfer to the manufacturing section, without verification, does not establish unexplained removal. On this basis the Tribunal upheld the Commissioner (Appeals) finding and set aside the duty demand on the ten transformers. [Paras 4]Duty demand on the ten transformers set aside; original demand quashed.Cenvat credit reversal - stock reconciliation with RG-23A Pt. I - Cenvat credit demand in respect of alleged shortage of BP sheets and CRGO electrical steel sheets. - HELD THAT: - The investigating officers did not determine shortage by a direct comparison of physical stock on the visit with the RG-23A Pt. I balance; instead they aggregated quantities issued during 1-9-1997 to 12-9-1997 with the register balance and compared that total to physical stock including items in various stages of processing. The respondent alleged that certain quantities available in the factory and quantities used in manufacture were not taken into account. The Tribunal concurred with the Commissioner (Appeals) that the department failed to prove an actual shortage of BP sheets and CRGO sheets and therefore the Cenvat reversal demand could not be sustained. [Paras 5]Cenvat credit demand for BP sheets and CRGO sheets set aside.Presumptive consumption based on GTP specifications - Cenvat credit reversal - Cenvat credit demand based on alleged clandestine removal of 14.124 M.T. of wires and strips determined by presumptive consumption using GTP specifications for the period 1-4-1993 to 12-9-1997. - HELD THAT: - The department's case rested on comparing total purchases during 1-4-1993 to 12-9-1997 with consumption calculated from GTP specifications to infer unexplained shortfall. The Tribunal accepted the Commissioner (Appeals) conclusion that such presumptive computation, without independent evidence of removal, is not proof of clandestine removal because actual consumption can vary from GTP norms. Accordingly the Cenvat credit demand based on this presumption was dropped. [Paras 6]Cenvat credit demand for the alleged 14.124 M.T. of wires and strips dismissed.Loss of finished goods in fire and remission of duty - Cenvat credit reversal - penalty under Rule 57-I(4) - Cenvat credit demand and penalty in respect of 9,000 kg (9 M.T.) of wires and strips said to have been destroyed in fire in 1994 and 1995. - HELD THAT: - Although the respondent's books recorded loss of transformers (new and repaired) in fire and corresponding consumption of 9,000 kg of wires and strips, there was no intimation to the department of any fire nor any claim for remission of duty on finished goods lost in fire. The Tribunal distinguished precedents where remission had been claimed and held those cases inapplicable here. In absence of notification to the department and a remission claim, the respondent's assertion of loss by fire was not accepted and the Commissioner (Appeals)'s order dropping the demand was set aside. The original adjudicating authority's duty/Cenvat demand and concomitant penalty under Rule 57-I(4) were restored, subject to quantification. [Paras 7, 8]Cenvat credit demand and penalty in respect of 9,000 kg of wires and strips restored; matter remitted for quantification.Final Conclusion: The appeal is partly allowed: demands and penalties confirmed by the original adjudicating authority are upheld in respect of Cenvat credit taken on 9,000 kg of wires and strips lost allegedly in fire (original order restored and quantification remanded), while demands in respect of ten finished transformers, BP sheets, CRGO sheets and the 14.124 M.T. wires/strips (presumptive shortfall) are set aside; penalty under Rule 57-I(4) will be equal to the duty confirmed and the original authority is directed to quantify the demand. Issues Involved:1. Alleged shortage and clandestine removal of 10 transformers.2. Alleged shortage of cenvated inputs (BP sheets and CRGO electrical steel sheets).3. Alleged unaccounted consumption and clandestine removal of wires and strips.4. Alleged illicit removal of wires and strips claimed to be destroyed in fire.Issue-wise Detailed Analysis:1. Alleged Shortage and Clandestine Removal of 10 Transformers:The department alleged a shortage of 10 transformers based on the stock check during the officers' visit on 12-9-1997. The respondent claimed these transformers were in the oven for reovening, a fact noted in the Panchnama and supported by the respondent's representative's statement. The Tribunal found that the officers did not verify this claim at the time, and thus, the duty demand on these transformers was correctly set aside by the Commissioner (Appeals).2. Alleged Shortage of Cenvated Inputs (BP Sheets and CRGO Electrical Steel Sheets):The department determined shortages of 30.745 M.T. of BP sheets and 29.65 M.T. of CRGO sheets by adding the quantity issued for manufacturing during 1-9-1997 to 12-9-1997 to the stock as per RG-23A Pt. I register and comparing it with the physical stock. The respondent argued that the officers did not account for certain quantities in various stages of processing. The Tribunal agreed with the Commissioner (Appeals) that the department failed to prove actual shortages, thus setting aside the duty demand.3. Alleged Unaccounted Consumption and Clandestine Removal of Wires and Strips:The department's allegation of a shortage of 14.124 M.T. of wires and strips was based on presumed consumption according to GTP specifications. The respondent contended that actual consumption could vary. The Tribunal found no evidence of clandestine removal and upheld the Commissioner (Appeals)'s decision to drop the Cenvat credit demand.4. Alleged Illicit Removal of Wires and Strips Claimed to be Destroyed in Fire:The respondent claimed a loss of 9,000 kg. of wires and strips in fire accidents in 1994 and 1995, but did not report these accidents to the department or claim remission of duty. The Tribunal found the claim difficult to believe without evidence of the fire or any remission claim. The Commissioner (Appeals)'s order setting aside the demand was not sustained. The Tribunal restored the original Adjudicating Authority's order, requiring the respondent to pay duty equal to the Cenvat credit on the 9,000 kg. of wires and strips and imposed a penalty under Rule 57-I(4).Conclusion:The Tribunal upheld the impugned order except for the part concerning the Cenvat credit demand and penalty related to the 9,000 kg. of wires and strips. The original Adjudicating Authority's order was restored in this regard, with instructions to quantify the Cenvat credit demand. The penalty would be equal to the confirmed duty. The Revenue's appeal was partly allowed, and the respondent's cross-objection was disposed of accordingly.