Reversal of ED on shortage of input during stock taking

[Pradeep Jain]

Dear Sir,

We are manufacture of Engines and Transmissions. For the production of the same approximate 1000 components consumed and there are multiple processes.  At the end of financial year physical stock was taken however there is shortage in physical stock and stock as per stock ledger.

It may due to non-booking of rejection on regular basis. Moreover we have been selling scrap on payment of Excise Duty. Please support with case law or section/rule.

Now query is that:-

 

Due to   Shortage in stock , during  annual stock taking , although there no physical movement of this inputs, Do we need to reverse Excise duty thereon ?

In such case there is judgement in the matter of Maruti Ltd.- according to that stocking is an accounting process and since there is no physical movement of goods therefore , no need for reversal  of Excise Duty( not having the copy , if possible please provide).  Is this case applicable on our Company also?.

Kindly reply

Best Regards

Pradeep Jain

[YAGAY andSUN]

Greaves Cotton Ltd. vs Commissioner Of C. Ex. on 15 November, 2006

 

AI Summary

Excise duty reversal for stock shortages depends on whether shortages reflect accounting adjustments or actual disposals. Whether excise duty must be reversed for shortages found on annual stock taking when there is no physical movement of inputs is contested; the issue centers on whether such shortages reflect accounting omissions versus actual disposals. Cited authority (Greaves Cotton) and the Maruti Ltd. approach support the proposition that treating stocking as an accounting process can avoid duty reversal, while actual sales or scrap disposals remain subject to excise compliance.