Commissioner of Central Excise vs Technoprints India Ltd.

Although several questions are raised by the Revenue in this appeal, the basic question is, whether the CESTAT was justified in upholding the order of the Adjudicating Authority in dropping the demand of excise duty on finished products found short during the course of search. In the present case, based on the statement of the accountant/panchanama recorded on 14th November, 1998, a show cause notice was issued calling upon the assessee to show cause as to why duty amounting to Rs. 14,99,870/- should not be recovered on 3,40,879.65 L. mtrs. of man-made fabrics which were found to be short during the course of the search. The Commissioner of Central Excise after considering the relevant documents including reconciliation statement submitted by the Director during the course of hearing came to the conclusion that the shortage that can be sustained was to the extent of 35,059.80 L. mtrs. of manmade fabrics and accordingly, confirmed the duty demand thereon amounting to Rs. 1,54,263.12. As regards the balance quantity of shortage claimed in the show cause notice, the Adjudicating Authority dropped the proceedings.

Challenging the aforesaid order, the Revenue filed an appeal before the CESTAT and the CESTAT by the impugned order upheld the adjudication order. Challenging the aforesaid order of the CESTAT, the Revenue has filed the present appeal.

It is the contention of the Revenue that the CESTAT erred in discarding the statement/panchanama recorded on 14th November, 1998 and accepting the reconciliation statement submitted by the Director subsequently during the course of adjudicating proceedings. According to the Revenue, in the absence of any retraction of the statement recorded on 14th November, 1998, the Tribunal ought not to have disturbed the order passed by the authorities below.

Perusal of the order of the CESTAT particularly para 3 thereof clearly shows that the reconciliation statement submitted by the assessee was based on the lot registers maintained by the assessee which were seized during the course of search. If the statement/panchanama recorded on the date of search is demonstrated to be erroneous on the basis of the documents seized during the course of search, no fault can be found with the decision of the CESTAT in discarding the statement/panchanama recorded on the date of search.

The specific finding recorded by the Adjudicating Authority and approved by the CESTAT is that out of 3,40,879.65 L. mtrs. of man-made fabrics found to have been short during the course of search, the assessee on the basis of the registers maintained and seized during the course of search has demonstrated that there is no shortage except to the extent of 35,059.80 L. mtrs. and accordingly demand of duty on man-made fabrics in excess of 35,059.80 L. mtrs. has been dropped. It is not the case of the revenue that the entries made in the lot registers maintained by the assessee to the effect that the goods were lying in the factory at different stages of production were erroneous or contrary to the inventory made. In the absence of any evidence to establish that the entries made in the lot registers were not in consonance with quantity of semi-finished goods found during the course of search, no fault can be found with the decision of the authorities below in discarding the statement/panchanama recorded on the date of search as the records found during the course of search establish to the contrary. In this view of the matter, we see no merit in the appeal and the same is dismissed with no order with costs.