2018 (3) TMI 1684 - AT - Central Excise

Tribunal overturns duty demand due to accounting challenges, lack of evidence. Precedents stress proof needed.

M/s. SAIL Versus Commr. of Central Excise, Bolpur

The appeal was allowed as the Tribunal found the duty demand under Rule 223A unsustainable due to practical challenges in steel plant accounting and lack ... Clandestine removal - shortage/excess in the Annual Shortage and Surplus Report - Held that:- The issue decided in appellant own case ROURKELA STEEL PLANT [SAIL] VERSUS COMMISSIONER OF C. EX., BHUBANESWAR [2000 (7) TMI 726 - CEGAT, KOLKATA], where it was held that There is nothing on record to show that the appellants have been indulging into excess clearances without payment of duty. The appellants have satisfactorily explained the difference between the figures as reflected in annual financial account and those entered in RG-I for each and every item - appeal allowed - decided in favor of appellant. Issues:Demand of duty under Rule 223A of Central Excise Rules, 1944 based on shortages during Annual Stock Taking.Analysis:The appellant, engaged in manufacturing Iron and Steel products, faced Show Cause Notices proposing duty demand under Rule 223A of the erstwhile Central Excise Rules, 1944 due to shortages in goods. The Commissioner of Central Excise confirmed a duty demand of Rs. 1,61,10,218.00 and imposed a penalty of Rs. 2,000.00, leading to the appellant filing an appeal. The appellant argued that the shortages in the Annual Shortage and Surplus Report were not actual but notional, as production was recorded on estimation while dispatch was based on actual RR weight. They claimed that adjustments for shortages or excess quantities were made in their accounts but not reflected in Central Excise records.The appellant cited a Tribunal order in a similar case where demands under Rule 223A were found unjustified due to practical challenges in steel plant accounting and the limitations of estimates. The Tribunal emphasized that the stock position based on estimation could not sustain allegations of stock shortages and consequent duty demands. Various reasons for discrepancies between RG-I and physical stock were highlighted, such as inaccuracies in estimations, unrecorded losses during processing, and errors in balancing stock figures. Considering these practical difficulties and appellant's submissions, the Tribunal concluded that the duty demand could not be sustained, ultimately allowing the appeal.Another Tribunal case involving Rourkela Steel Plant (SAIL) reinforced the principle that findings of clandestine manufacture and removal cannot be sustained without sufficient evidence. The onus to prove clandestine activities lies with the Revenue, and in the absence of concrete evidence, demands of duty cannot be justified. The Tribunal also noted that the demand was barred by limitation and that there was no suppression by the appellants, leading to the appeal being allowed with consequential relief.In light of the precedents set by the Tribunal in similar cases, the impugned Order confirming duty demand under Rule 223A was deemed unsustainable, and the appeal filed by the appellant was allowed. The decision was based on the established legal principles, practical challenges in steel plant accounting, and the lack of concrete evidence supporting duty demands based on stock shortages.