2002 (1) TMI 353 - AT - Central Excise

Summary

Issues:
1. Shortage of finished goods and input materials leading to Central Excise duty demand and penalties.
2. Imposition of penalty equal to the duty amount under Section 11AC read with Rule 57-I(4).
3. Allegation of fraud, suppression, and contravention of rules with intent to evade payment of duty.

Issue 1: Shortage of Finished Goods and Input Materials:
The appellants, engaged in manufacturing textile fabrics coated with PVC, faced shortages of PVC coated fabric and input materials during stock verification. The shortages amounted to Rs. 88,965 for finished goods and Rs. 3,57,798 for input materials like PVC resin, DOP, and Benzoplast. The General Manager admitted the shortages attributing them to recording errors and receipt discrepancies. The Joint Commissioner confirmed the demand of Rs. 92,772 under Section 11A and imposed penalties totaling the equivalent amount on the appellants.

Issue 2: Imposition of Penalty under Section 11AC:
The appellants contested the penalty equal to the duty amount imposed under Section 11AC, arguing that the show cause notice did not allege fraud, collusion, or wilful misstatement to justify such a penalty. The appellants relied on specific judgments to support their argument. However, the respondents contended that fraud or suppression need not be explicitly mentioned in the notice if there is adequate material to infer such behavior. The Tribunal considered both arguments and analyzed the facts of the case.

Issue 3: Allegation of Fraud and Contravention of Rules:
The Tribunal examined the show cause notice and the statements provided by the General Manager. It was noted that the notice invoked the proviso to Section 11A(1) and Rule 57-I(i)(ii) to allege fraud, suppression, and violation of rules with intent to evade duty payment. The Tribunal differentiated this case from the judgments cited by the appellants, emphasizing that intentional evasion of duty and improper credit availing were evident. While the penalty under Section 11AC and Rule 173Q was deemed unwarranted, the penalty under Rule 57-I(4) was upheld. The Tribunal dismissed the appeal, except for setting aside the Rule 173Q penalty.

In conclusion, the judgment upheld the penalties imposed on the appellants for shortages of finished goods and input materials, emphasizing the intentional evasion of duty and improper credit availing. The Tribunal clarified the application of penalties under Section 11AC and Rule 57-I(4) based on the specific circumstances of the case.