The Kolkata bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has set aside the excise demand, citing that issuing the SCN after a gap of approximately two years and four months from the date of inspection was inappropriate.
The Appellant was a manufacturer of paints. The Appellant’s unit is located at Shibpur, Howrah. The officers of Anti-Evasion Unit of Kolkata-II Commissionerate visited the unit on 11.01.2005 around 7.30 p.m. and took up the stock verification process. Stock-taking was conducted and Panchnama was drawn on 13.01.2005. As per the Panchnama, stock-taking commenced on 18.15 hrs. on 12.01.2005 and continued upto 18 hrs. of 13.01.2005. During the stock-taking the physical stock was found to be less than the stock as shown in the finished product’s Register. The shortage of finished goods arrived at by the officials was quantified and value was adduced and Excise Duty of Rs.1.07 Crores was demanded by way of Show Cause Notice issued on 04.12.2007. After due process, the Adjudicating authority confirmed the demand. Being aggrieved, the Appellant is before the Tribunal.
Mr. B.L.Narasimhan, representing the Appellant submitted that the details of alleged shortage is as per Annexure –N to the Show Cause Notice. However, the Department failed to give working sheets as to how this shortage was arrived at by them. He submits that the Appellant sought the copies of the working sheets vide their letters dated 22.12.2008, 07.01.2009, 25.02.2009, 19.03.2009 and 05.05.2009 [copies enclosed with the Appeal Book]. Vide their letter dated 25.02.2009, they have also sought cross-examination of 25 persons named therein who were part of the stock-taking and investigation.
He also submits that the Show Cause Notice issued on 04.12.2007 is time barred. The stock-taking was conducted on 13.01.2005 and no further investigation was taken up for issuing the Show Cause Notice, wherein the demand is purely based on the alleged shortage found on 13.01.2005. He relies on the case of law of Super Forgings & Steel Ltd. Commr. of Central Excise, Kolkata , Accordingly, he prays that the confirmed demand may be set aside on account of limitation also.
Mr P.Das, representing the Department reiterated the findings of the lower authorities and submitted that the Appellant did not cooperate with the Department while they are undertaking the stock-taking. When the Department sought help of about nine officials of the company to take up the stock-taking work, they offered services to only four employees. The Revenue officials had to struggle a lot to complete the stock-taking and arrived at the shortages. He submits that the Appellant was not in a position to explain the shortages and hence it was clear that the goods in question were removed clandestinely and therefore he justifies the confirmed demand.
The bench found that the entire case was built up by the Revenue on the ground that the huge shortage was found when the stock-taking was undertaken on 12.01.2005. It is seen that the appellants have been regularly seeking the copies of the stock-taking working sheets which was not provided to them, even after the Show Cause Notice was issued. As contended by the Appellant, theirs is a three shift manufacturing unit. If any stock-taking was to be conducted, it has to be ensured with stoppage of production at a particular time and then only the correct stock-verification can be done, which in this case has not been followed. The anomalies pointed out in the Panchnama also does not help the case of the Department.
Further also see force in the arguments of the appellant on the ground that the Show Cause Notice issued on 04.12.2007 is time barred. From the Show Cause Notice and the investigations referred to therein, we find that the entire demand is based purely on the shortage arrived at on 12/13.01.2005. As observed above, the Department has not undertaken any further investigation or verification which would necessitate any delay in issuing the Show Cause Notice. The Show Cause Notice has been issued nearly three years after the date of stock-taking. No explanation whatsoever is coming out of the Show Cause Notice as to why this delay was caused.
The two member bench of the tribunal comprising R.Muralidhar ( Judicial member) and Rajeev Tandon ( Technical member ) hope that the department shall initiate some action against the erring officer/official for issuing show cause notice to the assessee after a gap of approximately two years and four months from the date of inspection at the factory of the assessee. Accordingly, the tribunal held that the confirmed demand is not sustainable even on the point of limitation. Accordingly, CESTAT allowed the Appeals both on merits as well as on limitation. The Appellants would be eligible for consequential relief.
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