1996 (4) TMI 304 - AT - Central Excise

Tribunal upholds penalty for shortages and credit disallowance, deems method reliable.

The Tribunal upheld the penalty imposed on the assessees for shortages in finished goods and disallowance of Modvat credit, despite setting aside the duty ... Demand - Shortages in finished goods as well as raw materials Issues:1. Shortages in finished goods and raw materials discovered during a factory visit.2. Disallowance of Modvat credit and imposition of penalty.3. Appeal filed against the order of the Collector (Appeals).Analysis:1. The appeal concerns shortages in finished goods and raw materials discovered at the factory premises. The officers detected discrepancies in production records, leading to a show cause notice and subsequent confirmation of a demand amounting to Rs. 51,344.45 for finished goods shortages and disallowance of Modvat credit worth Rs. 94,110.18 on raw materials by the original authority. Additionally, a penalty of Rs. 5,000 was imposed on the assessees. The Collector (Appeals) set aside the duty demand and Modvat credit disallowance but upheld the penalty, prompting the Revenue to file the current appeal.2. Despite due notice, the assessees did not appear or request an adjournment during the proceedings. The argument put forth by the ld. JDR for the appellants focused on the weighing facilities at the factory and the methodology used to calculate weights in the absence of a weighing scale. The JDR contended that the shortages were based on approximations and could be verified using established formulae, citing the practice in the steel industry and referring to a relevant Tribunal judgment. The Works Manager's presence during the inspection and acknowledgment of shortages further supported the Revenue's stance.3. The Tribunal's analysis delved into the assessees' lack of a weighing balance and the system they employed to calculate weights based on specific formulae considering the dimensions of the pipes and tubes produced. This system, acknowledged by both the assessees and the Department, was deemed effective in recording total weights in the RG 1 Register. The Tribunal highlighted the empirical formula used to estimate shortages and emphasized the reliability of this method in the absence of physical weighment facilities. The Tribunal also addressed the accuracy of weight verification for raw materials compared to finished goods, ultimately concluding that the Collector's reliance on a previous judgment was misplaced, and the Original Authority's findings were upheld.4. The Tribunal dismissed the notion that weighment could not have been completed within a short timeframe, clarifying that the counting and multiplication process for pipes and tubes did not require physical weighment and could be adequately accomplished within the given period. Upon reviewing the material, the Tribunal found no errors in the Original Authority's findings, leading to the setting aside of the Order-in-Appeal and allowing the Department's appeal.