In a major relief to the Steel Authority of India, the Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the excise duty demand on differential value of stock of finished or semi-finished goods.
In the present appeal, the department found various differences in the physical stock of finished/semi-finished goods shown in their statement when compared with the adjusted RG-1 opening balance of stock of finished/semi-finished goods for the years 2001-02, 2002-2003 and 2003-2004.
The advocate for the appellant submitted that the goods produced are recorded in RG1 based on estimation. The physical stock of goods was on the basis of volumetric estimation and its conversion into theoretical weight based on average cross-sectional weight. The goods are physically weighed only at the time of clearance of the goods from the factory/depots.
It is further submitted that the show-cause notices demanded duty under Section 11A but the demand was for more than the normal period. Show-cause notices did not allege fraud, collusion, wilful misstatement or contravention of the provisions of Central Excise Act, 1944 and they have not invoked proviso to Section 11A of the Central Excise Act, 1944.
In Rourkela Steel Plant (SAIL) vs. CCE, Bhubaneswar, the Tribunal had held that even if there are differences in the stock taking and the shortages are found, the duty can be demanded only when they are removed from the factory. The findings on the clandestine manufacture and removal cannot sustain against the appellants as Revenue has not provide any proof of clandestine removal. Accordingly, demand was set aside.
The Two-Member Bench of the Tribunal comprising Dr DM Misra, Judicial Member and R Bhagya Devi, Technical Member observed that “In the present appeal also even if the shortages are to be accepted, there is no iota of evidence either in the show-cause notices or in the impugned order to prove that these goods were clandestinely removed. By following the ratio of the above judgment and based on the observations as recorded above, the demands are set aside and accordingly, penalty is also set aside.”
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