Confiscation of Excess Stock not permissible in the absence of Physical Stock-taking and Non-disclosure of Stock-taking methodology: CESTAT

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal( CESTAT ) has held that confiscation of excess stock is not permissible in the absence of physical stock-taking and non-disclosure of Stock-taking methodology.

In the factory of A Kumar Industries, the appellant, investigating officerconducted the stock verification of the finished goods and foundan excess stock of 32.15 MT of MS ingots as compared to the stock recorded in the stock register. The statement of Shri. Amit Gupta partner of M/s A Kumar Industries was recorded.

The adjudicating authority in the Order –In -Original confiscated the stock of 32.15 MT MS Ingots valued at Rs. 9,87,005/- and imposed a redemption fine of Rs. 2 Lakhs and penalty of Rs. 35000/- and a penalty of Rs. 50,000/- was also imposed on Shri. Amit Gupta partner of M/s A Kumar Industries. On appeal, the Commissioner (Appeals) reduced the penalty from 35000 to 10,000/- and on Shri. Amit Gupta from 50,000/- to 20,000/-.

Shri. Ashish K Singh, Counsel appeared on behalf of the appellant stated that the difference in stock was arrived at without carrying out the physical stock of the finished goods and conducted that the manner of the stock-taking but the fact remains that no physical stock was taken. The manner was also not specified.

It was merely because of Shri. Amit Gupta in his statement gave consent to the methodology adopted for taking physical stock it cannot be assumed that the physical stock was conducted. Shri. G. Kirupanandan, Superintendent (AR) appearing on behalf of the Revenue supported the finding of the impugned order.

A Coram of Single-member Mr Ramesh Nair(Judicial) observed that the appellant objected to the difference in the stock merely on the ground that no physical stock-taking was conducted and the methodology of the stock-taking was not disclosed.

The Tribunal remanded the matter to the adjudication authority for reconsideration after allowing the cross-examination of panchas. It was viewed that once the penalty is imposed on the partnership firm its partner cannot be imposed penalty separately.

The Bench held that no penalty is imposable on Shri. Amit Gupta and allowed the appeal by way of remand to adjudicating authority.

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