The single bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) in Delhi, has upheld the Central Excise duty demand under Section 11A read with Section 174 of the CGST Act, 2017, due to a shortage of raw materials and finished goods, and has confirmed the liability for the associated penalty.
The current appeal challenges the order-in-appeal No. RPREXCUS-000-APP-116-22-23 dated 17.01.2023, where the Commissioner (Appeals) confirmed the central excise duty demand for raw material and finished goods shortages under Section 11A/11A(4) of the CGST Act, 2017, and imposed an equivalent penalty under Section 11AC(1)(a) of the Central Excise Act, 1944.
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M/s. Tridev Ispat Pvt. Ltd. manufactures M.S. Ingots using Sponge Iron, Pig Iron, and scrap. A stock verification conducted on 12.04.2012 revealed a shortage of 197.115 MT of M.S. Ingots (finished goods), 154.56 MT of Sponge Iron, and 11.04 MT of Pig Iron (raw materials). The appellant deposited Rs. 13, 15,617/- as central excise duty for these shortages. Additionally, evidence from loose papers indicated unaccounted despatches, leading to a calculated central excise duty of Rs. 71, 45,014/- on clandestine removals.
A show cause notice dated 31.03.2014 was issued demanding central excise duty for both the detected shortages and clandestine removals. The initial adjudication confirmed the duty demand, prompting the appellant to challenge the denial of cross-examination in High Court. The High Court remanded the case for re-adjudication, resulting in confirmation of Rs. 13, 15,617/- with interest and penalty, and dropping the demand for clandestine removals. The appellant’s subsequent appeal to the Commissioner (Appeals) was rejected, leading to the current Tribunal appeal.
Mr. Arun Sheoran, representing the respondent, argued that the appellant was given adequate opportunity to declare stock, and the discrepancies were based on their own declarations. He cited legal precedents stating that admitted facts do not require further proof.
Further observed that the core issue in the appeal pertains to the central excise duty demand for stock shortages. The Revenue’s stance is that the stock verification on 12.04.2012, in the presence of Ashish Agarwal, revealed discrepancies based on the appellant’s own records.
Rajnish Kumar Verma, representing the appellant, attempted to link the stock shortage with clandestine removals. The Adjudicating Authority had only confirmed the demand related to stock shortages and dropped the demand for clandestine removal. The appellant also claimed that the stock verification was flawed and conducted under undue pressure, though these objections were not raised during the initial verification.
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The Tribunal Comprising Binu Tamta (Judicial member) observed that the imposition of mandatory penalty under Section 11AC (1) (a) was justified for detected shortages, supported by Apex Court decisions emphasizing penalty for rule violations. The Tribunal affirmed the decision, dismissing the appeal.
The Tribunal upheld the imposition of central excise duty and penalty for the shortage in stocks, with no grounds for interference in the impugned decision. The appeal was thus dismissed.
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