2017 (2) TMI 829 - AT - Central Excise

Tribunal rules in favor of appellant, sets aside excise duty demand.

M/s. Kaypee Industries Versus Commissioner of Central Excise, Mumbai

M/s. Kaypee Industries Versus Commissioner of Central Excise, Mumbai - TMI Issues Involved:Shortage of finished goods during stock taking leading to demand of excise duty.Analysis:The case involved a situation where a departmental officer found a shortage of 2617 pieces of finished goods during a stock taking at the factory of the appellant. This shortage was the basis for issuing a show cause notice and confirming a demand of excise duty amounting to Rs. 1,06,774 in the Order-in-Original. The appellant, however, contended that the stock was actually present in the factory but was not taken into account during the stock verification process. The appellant immediately informed the department about the correct stock position after the stock taking, but the department did not respond and confirmed the demand solely based on the panchanama. The appellant argued that the goods recorded in the RG1 register were cleared on a daily basis after the stock taking, indicating that there was no actual shortage. The Commissioner(Appeals) upheld the demand, but the appellant appealed to the Tribunal.Upon reviewing the submissions of both parties and the records, the Tribunal found that the departmental officers did not re-visit the factory to verify the appellant's claim that the allegedly shortage goods were actually present in a different location within the factory. This failure to consider the appellant's request amounted to a violation of the principle of natural justice. Additionally, the Tribunal noted that the appellant had cleared the entire quantity recorded in the RG1 register after the stock taking, which would not have been possible if there was an actual shortage. Therefore, the Tribunal concluded that there was no actual shortage of goods in stock, and the demand confirmed based on the alleged shortage was incorrect and unsustainable. Consequently, the Tribunal set aside the impugned order and allowed the appeal, providing for any consequential relief in accordance with the law.In conclusion, the Tribunal's judgment centered on the failure of the departmental officers to re-visit the factory to verify the appellant's claim of stock presence, the clearing of goods recorded in the RG1 register post stock taking, and the violation of natural justice principles. The Tribunal ruled in favor of the appellant, highlighting the absence of an actual shortage of goods and overturning the demand of excise duty based on the incorrect shortage assessment during stock taking.