In Appeal No. E/562/2008- CESTAT - CESTAT (Bangalore) comes to the aid of Steel Authority of India Ltd., holds no evidence of clandestine removal of goods
Members D.M. Misra (Judicial) & R. Bhagya Devi (Technical) [25-05-2023]

Read Order: Steel Authority of India Ltd v. The Commissioner of Central Excise

Chahat Varma

New Delhi, May 29, 2023: The Bangalore bench of the Customs, Excise, and Service Tax Appellate Tribunal has ruled in favor of Steel Authority of India Ltd. (appellant), citing the case of Rourkela Steel Plant vs. CCE, Bhubaneswar [LQ/CESTAT/2000/5]. The Tribunal has held that even if shortages in stock are accepted, there was no evidence presented in the show-cause notices or the impugned order to prove that the goods were clandestinely removed.

Briefly stated facts of the case were that the appellant, manufacturers of iron and steel products, conducted annual stock verification of their finished/semi-finished goods. However, discrepancies were found by the department in the physical stock compared to the adjusted RG-1 opening balance for the years 2001-02, 2002-2003, and 2003-2004. Show-cause notices were issued demanding duty on the differential value of the stock, and the Commissioner confirmed the demands in the impugned order.

The bench comprising of D.M. Misra (Judicial) and R. Bhagya Devi (Technical) held that the basis for demanding duty went beyond the scope of the show-cause notices. The bench noted that the parameters relied upon by the authorities in the show-cause notice and the parameters relied upon by the learned Commissioner were at variance, which was legally not sustainable.

The bench further noted that the show-cause notices though demanded duty beyond the normal period, failed to invoke proviso to section 11A of the Central Excise Act, 1944, but the learned Commissioner in his impugned order invoked proviso to section 11A and imposed penalty under section 11AC, which was beyond the scope of show-cause notices.

The bench further took note of appellant’s own case, wherein the Tribunal had held that the discrepancy between the RG1 stock and the physical stock were based on the estimated production and not on actual weighment. Comparison between two estimations was inherently inaccurate. Considering the practical difficulties in estimating the actual stock and in view of the submissions made by the appellant, the Tribunal had set aside the impugned order.

Based on the above observations, the demands as well as the penalty were set aside.