TaxTMI 
TaxTMI 
2024 (6) TMI 842
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....goods they were being stolen from the premises of the assessee since long back. One of the event of theft of raw materials viz. MS plates and Angels from the Godown/Stock yard which occurred on 02.10.2011 had been detected by local police and hence the management of the assesee had taken decision to conduct the physical stock taking of all raw materials to know the factual position of their raw material stock. During the physical stock taking, they had found physical shortage of huge quantity of the said raw materials than the actual quantity of recorded stocks. However, the assessee had not reversed the cenvat credit involved in the materials found physically short. Acting on said intelligence the DGCEI officers, searched the various manufacturing premises of the assessee, resumed records/ documents under the Panchanama proceedings, recorded statements of various personnel of the assessee, including the Managing Director. The investigation reached to a conclusion that there was huge physical shortage of raw materials, than the recorded stock. Accordingly, four show cause notices dtd. 15.07.2014 and 23.07.2014 were issued to the M/s Anupam Industries Ltd., Unit -V, Unit -IV, Unit-I....
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.... 2.1 He also submits that as against this, the impugned order purely presumes that since there was one theft identified in October 2011 (which was of a very minuscule quantity), even in the past such theft must have taken place, which amounts to 'raw materials not used in production' and hence, the entire demand as such stand raised on such presumption basis. 2.2 He further submits that entire demand in the present matter of revenue is based on consumption entry made in SAP system. It is an irony that while the presumption is that raw material was not used for production, its quantification is made on basis of SAP ERP entry passed for 'material consumed for production' which on the fact of it renders the entire proceedings liable to dropped at the outset. The very fact that the above reconciliation done by the appellant was towards RM as well as WIP itself shows that it was not a case of RM not used in production at all. Further, it is not at all the case of the revenue that the difference in the weight as adjusted in SAP ERP was not within the prescribed IS-1852:1985 tolerance limit of +5% when one considers the quantum of steel handled by the Appellant till the date of such adj....
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....n in SAP System (which is the subject matter of dispute) is at variance with the consumption norms production made by the appellant or in excess of reasonable variation in stock quantum at all. The appellant simply got the SAP system in sync with the actual stock position, by making missing entries towards consumption of material in production process. No demand thereon as such can be confirmed. 2.7 He further submits that the various statements recorded during the course of investigation did not show how, when and how much stock were stolen at all. It only refers to making entry in ERP system to bring it in sync with physical stock (which too was taken on estimate basis). The Managing Director merely agreed with the contents of statements of various persons shown to him, to the limited extent of whether the employee's statement actually stated it contents or not. This does not amount to admission of any sort by anyway at all. 2.8 As regard the allegation regarding the availing cenvat credit only on the basis of invoices without receiving any accompanying goods (M/s. San Enterprise and M/s. Evershine Sales), it appears that this objection is raised for the sake of raising, and to....
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.... police. They internally conducted the physical stock of their raw material and some shortage was found but this did not mean that all the disputed goods had been stolen and not used in the manufactured goods. We find that the whole inquiry has revolved around the basic presumption that huge raw material has been removed from their premises during the disputed period but it was noticed that there is absolutely no evidence with the department in this regard as to where and when the said raw material moved out of their factory premises. In the present matter department merely assumed that the said shortage was due to theft. Further we also find that there is no other corroborative evidence to establish that the shortage was on account of short-receipt of raw material. In that circumstances, we hold that the investigation was conducted by the Revenue is deficient and incomplete. In that circumstances, the charge of shortage of inputs stands disproved. 4.1 We also find that the recovery of Cenvat credit has been ordered under the impugned order on the basis that the cost centre entries vide 201 to 202 on SAP accounting package adopted by the them has been used to accommodate shortage ....
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....t has not used the inputs on which credit had been taken. In the present case, the demand is on account of the fact that there are some shortages which are not reconciled. The appellant clearly explained the reasons for the such shortage which were reconciled at the time of implementation of SAP system. We also find that as regards the shortages in stock detected during physical verification by the appellant itself, department nowhere produced any positive evidence that the disputed inputs found so short were disposed of in any manner other than in the manufacture of final products. The charge of clandestine removal has to be proved by the Revenue by bringing positive evidence on record and not by presumptions and assumptions. The Supreme Court has held in the judgment in the case of Oudh Sugar Mills Ltd. v. U.O.I., 1978 (2) E.L.T. (J 172) that no show cause notice or an order can be based on assumptions and presumptions. "The findings based on such presumptions and assumptions without any tangible evidence will be vitiated by an error of law." 4.3 We find that the evidence on record does not indicate any diversion of inputs in contravention of rules relating to utilisation of inp....