Whether shortage found on stock verification amounts to clandestine removal and Cenvat credit on xeroxed copy of bill of entry available?

PJ/Case Laws/2012-13/1351

Case:-C.C.E. MEERUT-I VS. TAYAL STEEL PVT. LTD.

Citation:-2012(286) E.L.T. 248 (Tri.-Del)

Brief Facts:- At the time of the officer's visit to the respondent's factory, the stock of finished goods of M.S. Ingots was determined by ascertaining the average weight per ingot by actual weighment of 10 M.S. Ingot; and thereafter by multiplying the average weight by the number of ingots found. On this basis, the stock of M.S. Ingots worked out to 70.705 M.T., while as per the RG-I Register, the stock was supposed to be 81.075 M.T. and as such there was shortage of 10.370 M.T. involving central excise duty. The respondent pleaded that the shortage may be due to mistake in the counting of ingots by illiterate labourer. They, however, paid the duty on the ingots found short. It was also found that they had taken cenvat credit of additional customs duty of Rs. 41,461/- on the basis of photocopy of the bill of entry which was not a valid document for cenvat credit as there was no evidence that the original copy had been lost in transit. The respondent reversed the cenvat credit.

Thereafter Department has issued a show cause notice and the adjudicating authority confirmed the duty demand on the goods found short and also the cenvat credit demand along with interest and imposed penalty under Section 11AC and another penalty under Rule 25 of the Central Excise Rules, 2002 and Rule 15 of the Cenvat Credit Rules, 2004. The amount already deposited was appropriated. Aggrieved by this order respondent filed appeal before Commissioner (Appeals), the Commissioner (Appeals) vide their order in appeal, set aside the Assistant Commissioner's order. It is against this order of the Commissioner (Appeals) that the department has come in appeal. The respondent have also filed a cross objection in respect of the Revenue's appeal.

Appellant’s Contention:- The appellantpleaded that so far as the issue of the availment of credit on photocopy of the bill of entry is concerned, the photocopy on which the credit has been taken is not certified copy and there is no evidence of loss of the original copy of the bill of entry, that in view of these circumstances, the Cenvat credit is not available to the respondent and in this regard, he relied upon the judgments of the Tribunal in the case of Vardhman Spg. & Gen. Mills Ltd. v. C.C.E. reported in 2002 (144) E.L.T. 570 (Tri.-Delhi) and also in the case of CEAT Limited v. C.C.E., Mumbai-IIIreported in 2008 (222) E.L.T. 120 (Tri.- Mumbai). As regards the shortage of finished goods, the respondent did not dispute the method of weighment and the fact of shortage of the stock vis-a-vis the balance recorded in RG-I Register at the time of stock taking, that since the respondent have not given any satisfactory explanation, the only reason for the shortage found can be the removal without payment of duty and that the Commissioner (Appeals)'s finding that there is no evidence of clandestine removal of the goods without payment of duty is not correct. In view of this, he pleaded that the impugned order setting aside the order-in-original passed by the Commissioner is not correct.

Respondent’s Contention:- The Respondent has not appeared for hearing but they filed Cross Objections. In the memorandum of cross objection filed by the respondent, they disputed the fact of shortage of goods on the ground that the method of determination of weight of the ingots was not correct, that the weight should have been determined by actual weighment of the entire stock and not on average weight per ingot, that the cenvat credit of additional customs duty had been rightly taken on the basis of photocopy of the triplicate bill of entry and that as such, there is no infirmity in the impugned order.

Reasoning of Judgment:- The Tribunal hascarefully considered the submissions from both the sides and perused the records. Hearing notice sent to respondent well in time and acknowledged but no one appeared for hearing when matter called, in that view, matter decided ex parte. So far as the availment of cenvat credit on the basis of photocopy of the triplicate copy is concerned, the document on the basis of which the credit has been taken is simply a photocopy and not the copy certified by the assessing officers. There is no evidence that the original triplicate copy of the bill of entry had been lost. The Tribunal in a series of a decisions in the cases of Vardhman Spg. & Gen. Mills Ltd.(supra) andCEAT Ltd. (supra) has held that modvat credit is not available on photocopy of the bill of entry when the same has been taken without certifying by the Asstt. Commissioner about loss of the original triplicate copy of the bill of entry. In this case, it is not disputed that the cenvat credit had been taken without the permission of the Asstt. Commissioner. In view of this the Commissioner (Appeals)'s order permitting the cenvat credit on the basis of the photocopy of the bill of entry is not correct and is liable to be set aside.

The Tribunal further finds regards the shortage of the finished goods found, that the weighment had been determined in presence of the respondent's representative. For determining the weighment of the 10 ingots had been done and the average weight per ingot had been determined and thereafter the total weight had been determined by multiplying the total number of ingot; with the average weight. In that view, while determining the weight in this manner, there will be only marginal difference between the weight recorded in the RG-I register and the weight determined but the difference cannot be to the tune of 10 M.T. The respondent have not given any satisfactory explanation for the shortage. In view of this,the duty in respect of the shortage has been rightly demanded and the penalty had been rightly imposed and as such, the Commissioner (Appeals)'s order setting aside the order of the original adjudicating authority's order on this point is not correct and is liable to be set aside.

Decision:-The impugned order of Commissioner (Appeals) is set aside and the order in original passed by the Asstt. Commissioner is restored. The revenue’s appeal is accordingly allowed.

Comment:- The analogy drawn from this case is that cenvat credit is not available in respect of photocopy of bill of entry as it is not a valid document and shortage found during stock verification without satisfactory explanation amounts to clandestine removal and liability to pay duty also arises.

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PJ/Case Laws/2012-13/1351

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