CENTRAL EXCISE ACT

37. When there is usage and accounting of large number of inputs and there is excess in some and shortage in other can the duty be levied and collected on shortages ignoring excesses in the absence of any mala fide intention or clandestine removal.

Held – No.

During the physical verification at the premises of the appellant dealer, shortages were found in certain items. The appellant was availing Cenvat on inputs and hence differential dues were demanded for the shortage of inputs. The Commissioner appeals confirmed the order of the lower authorities.

The appellant carried the matter before the Tribunal. The learned advocate for the appellant contended as under before the Tribunal.

1. Appellant consumed a large number of inputs and considering the magnitude of the inputs used the shortage was only 0.6%.
    

2. There were excess quantities of certain items, the revenue has ignored the excess and levied duty only on shortages.
    

3. There is no evidence of diversion or clandestine removal of goods and the authorities have travelled beyond the scope of the show cause notice.
    

4. The errors were due to data entry made for issues to production during the year.
    

5. The shortage may also be, due to the reason that issue made of one similar item in place of another item but the recording was vice versa. It was explained with a specific stock item that, there was shortage of product N13 but excess is shown in N12 which proves the contention of the appellant.
    

6. It could also have been a case that stores were replaced in place of damage or defective items immediately to production but recording of same would happen at the time of stock taking only.

The Tribunal relying on the decision of Hindustan Zinc Ltd. vs CCE 172 ELT 244, held loss less than 1.5% is reasonable considering the fact that large number of inputs are dealt with by the appellant and in practice there is bound to be some variations. There was no point in demanding duty on such shortages in the absence of mala fide.

[Densokirloskar Industries Pvt Ltd. u/s CCE Bangalore 195 ELT 102]

38. Can the Cenvat credit be denied to the purchaser assessee on assembled crane, because crane was dismantled and removed as scrap on payment of duty by seller?

Held – No.

The seller supplier had purchased a new crane and dismantled this existing 10 tonne crane as a scrap one. The purchaser appellant found it in working conditions and, therefore, purchased the same for use in their factory as capital goods. They procured a certificate from the registered Chartered Engineer to the effect that the item is not a melting scrap but a second sale in dismantled condition. The same was installed in the foundry factory of the appellant purchaser.

The revenue denied the capital goods credit on the ground that description of goods is not matching and the invoice shows heading 7204.90 which is not specified heading for claiming credit on capital goods.

It was contended by purchaser appellant that certificate from Chartered Engineer established the fact that the crane was assembled and installed in the purchaser appellant factory. As far as the purchaser appellant is concerned, it is capital goods for them and the fact that they have purchased second hand condition on scrap, cannot be a ground to deny credit. It was further contended that classification adopted by the seller and the description given by him in invoice cannot be a ground to reject the benefit. The following decisions were relied upon:-

1. CCE vs. Area Petrochem 63 RLT 899.

2. CCE vs. Taj Forgings & Stamping 79 ELT 168.

3. Steelage Industries Ltd. vs. CCE 149 ELT 1366.

The Tribunal allowed the claim of the purchaser appellant relying on the above quoted decisions and the fact that it is not disputed by the revenue that crane has been reassembled, the credit is allowable on the crane as an item of capital goods and that, reassembled crane is a goods crane made functional to use for handling inputs for manufacture of final products. Merely for classification of different chapter heading and description of goods by seller the claim of credit to purchaser cannot be denied.

[Maharshi Alloys (P) Ltd. vs. CCE 195 ELT 118]

39. When finished goods are moved to store room but are in open unpacked condition and not recorded in RG-I can it presumed that the intention is to remove the goods clandestinely?

Held – No.

The department on visit to appellant’s factory premises found mismatch of goods lying in store room and as recorded in RG-1 register. Appeals before Commissioner’s appeals were dismissed.

The appellants argued before the Tribunal that they were SSI units. The appellants had only committed a mistake of not recording the goods in RG-1 that too due the reason that the goods were to be packed after quality checking. There is no evidence or intention to remove the goods clandestinely. They relied on the decision of Bhilai Conductors (P) Ltd. 125 ELT 781.

The Tribunal agreed with the appellant on the grounds that SSI unit cannot be expected to maintain the standard of accounting as is expected in organized sector, besides there was nothing on record to show that appellant was involved in removal of goods clandestinely, again the goods unaccounted were lying in the factory premises in open and unpacked condition and hence the decision of Bhilai Conductors (P) Ltd. was squarely applicable.

[H.R. Products Pvt. Ltd. vs. CCE 195 ELT 112]