The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the appellant-manufacturer had contravened the provisions of Rule 4, 6, 8,10, 11 and 12 of Central Excise Rules, 2002 by not recording its production of finished goods found short during the physical verification and not determining the central excise duty on the goods found short.
The bench of Binu Tamta (Judicial Member) has observed that Had the investigation not been taken up by the Department, the shortage in the stocks would not have come to light causing loss to the Government exchequer. In the circumstances, the imposition of mandatory penalty on the shortage detected, the appellant has been rightly held liable for penal action under Section 11 AC(1)(a) of the Central Excise Act, 1944.
The appellant, M/s. Tridev Ispat Pvt. Ltd. is engaged in the manufacture of M.S. Ingots, for which, Sponge Iron, Pig Iron, and scrap are the raw materials. During the search conducted at the factory premises of the appellant on 12.04.2012, stock verification of inputs and the final product was conducted in the presence of Shri Ashish Agarwal, Director of the appellant company and two independent witnesses. On stock verification, shortage of 197.115 MT. M.S. Ingots (finished goods), 154.56 MT of Sponge Iron and 11.04 MT of Pig Iron (raw material) was detected, against which the appellant deposited central excise duty of Rs.13,15,617 vide their Cenvat account. During investigation, it was also found that the appellant had removed their finished goods clandestinely as revealed from the scrutiny of loose papers, indicating unaccounted despatches by the appellant. The central excise duty payable on such clandestine removal was worked out to Rs.71,45,014.
Show cause notice was issued to the appellant and five other noticees demanding central excise duty on two counts i.e. Rs.13,15,617/- for shortage detected in the raw material and finished goods under Section 11A(4) along with interest for late payment and penalty and Rs.71,45,014/- on account of clandestine removal of goods. On adjudication, the demand was confirmed, however, the appellant approached the High Court challenging the denial of cross examination, by which the matter was remanded for re-adjudication. On remand, the Adjudicating Authority confirmed the demand of Rs.13,15,617/- along with interest and equal amount of penalty and dropped the remaining demand of Rs.71,45,041.
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The appellant filed the appeal before the Commissioner (Appeals), which has been rejected by the order.
The appellant challenged the conclusion that short-found inputs and finished goods were clandestinely removed on the ground that the factory search lacked proper authorization. The stock verification was based on estimation, not physical verification. Verification methods were inappropriate and not in line with mandated procedures. The stock verification process was hastily conducted and flawed. There is no evidence of clandestine transportation or sale of goods. The payment of duty before show cause notice issuance was under coercion. That shortage cannot be assumed as clandestine removal without corroborative evidence.
The department contended that sufficient opportunity was granted to the appellant to declare the stock and, therefore, the difference found was on the basis of the declaration given by the appellant themselves, which they could not explain. Admitted facts need not be proved or established by the Department and hence no further corroboration is required.
The tribunal noted that what is admitted need not be proved, as held by the Apex Court in the case of CCE, Madras Vs. Systems and Components Pvt. Ltd., the charge of shortage in stocks stood conclusively proved by the admissions of the authorized signatory of the company. Similarly, the observations of the Tribunal in the case of K.P. Basheer Vs. Collector of Central Excise, Cochin , that the admitted facts need not be proved or established by the Department.
The tribunal dismissed the appeal and held that for violation of the Rules, the appellant is undoubtedly liable to pay the penalty as prescribed under the Rules.
Case Details
Case Title: M/s. Tridev Ispat Pvt. Ltd. Versus Commissioner of Central Goods
Citation: Excise Appeal No.54880 of 2023 (SM)
Decision date: 02.09.2024
