TaxTMI 
TaxTMI 
2015 (11) TMI 669
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....on (in lumps and in granules form) Pig iron in granules form, PCM Jam, MS Scrap etc. besides availing cenvat credit of central excise duty paid on capital goods and service tax paid on input services. Surprise stock check of the appellant's factory was conducted on 25.11.2008 and physical stock taking was conducted from 25.11.2008 to 29.11.2008. As a result of verification of stock, it was found that the physical stock of raw materials was short to the tune of 1672.423 MTs valued at Rs. 2,90,60,479/- (Rupees Two Crores Ninety Lakhs Sixty Thousand Four Hundred and Seventy Nine only). After completion of investigation show-cause notice was issued and on completion of proceedings in accordance with law, demand for cenvat credit of Rs. 41,90,52....
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....d products without payment of duty, the demand cannot be sustained. He draws our attention to the revised work sheets submitted by them right from the year 2003-04 to 2008-09 (November) and submits that if the correct burning loss is taken into account, there was no shortage of raw-material at all. 5. Learned AR submits that it is the appellant's duty to account for the raw-materials and the shortage has not been disputed. He also submits that appellants did not maintain raw materials account properly at all and therefore demand is sustainable. 6. We have considered the submissions made by both the sides. On going through the records and submissions we find that the appellants are using different types of raw material viz. MS Scrap, P....
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....ponge iron. The capacity of the furnace is 5 tonnes. He also stated that the stock available on 25.11.2008 was sufficient for 30 to 40 heats. If the melters submissions are taken into account, the total stock comes to only about 200 tonnes which shows that even the melter underestimated the quantity available. Shri Govind Kumar, Managing Director on 25.11.2008 at the conclusion of the stock verification, had stated that right from the inception of the company burning loss was accounted at 2-3% and actual burning loss would be 18 to 25%. He also stated that they had not taken physical stock of the raw materials since the inception of the factory in 2003. He also stated that in the initial years they had taken burning loss as 2 to 4% which sh....
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....rs. However this is not a proper method of looking at the stock. What is to be seen is what was the difference between the closing balance and the stock available at the time of verification and when there is a huge difference it shows that the appellants had not at all considered proper maintenance of records necessary. There is no explanation forthcoming as to why the appellant failed to account for the raw material correctly over a period of 5 years and how they did not know that the burning loss could be 15%; there is no explanation forthcoming as to why they did not maintain the account on the basis of accounting principles. The claim that raw material accounting was done on a hypothetical basis is not at all logical in view of the fac....