2004 (2) TMI 472 - AT - Central Excise

Summary

Issues:
Validity of the impugned order reducing duty and setting aside penalty.

Analysis:
The Revenue challenged the Commissioner (Appeals) order which reduced the duty and set aside the penalty. The Revenue argued that the Director of the respondent company admitted to the non-accountal of excess goods and shortage of raw material, and the duty amount should not have been reduced as the excess goods were manufactured from the material found short. The Revenue also contended that the penalty should not have been set aside as it was only deposited after the detection of the raw material shortage and excess finished goods by the Department officers.

On the other hand, the respondent's counsel argued that there was no evidence to prove that the excess goods were manufactured from extra raw material brought from outside the factory. It was contended that the assumption of duty evasion was based on presumption. The counsel also highlighted that since there was no apportionment of the penalty amount under Section 11AC and Rule 173Q, the entire penalty was rightly set aside.

The Tribunal observed that the Director of the respondent company was present during the physical checking of finished goods and raw material, where he admitted to the excess finished goods and shortage of raw material. The duty was debited on the finished goods cleared without payment. The Tribunal noted that the duty reduction by the Commissioner (Appeals) based on the assumption that excess goods were manufactured from short raw material was not legally sustainable as the Director did not state so in his statement.

Regarding the penalty, the Tribunal found that the duty payment was not voluntary but made after being caught by the Department officers, as admitted by the Director. The Tribunal held that the penalty imposition was justified, and the Commissioner (Appeals) erred in setting it aside. Additionally, the Tribunal noted that the non-apportionment of penalty under the relevant provisions was not a valid reason to set aside the penalty entirely, especially when the duty evasion was acknowledged by the respondent.

Moreover, the Tribunal mentioned that the respondent had already deposited 25% of the penalty as per the original order, fulfilling the requirements of Section 11AC. Consequently, the impugned order of the Commissioner (Appeals) was set aside, and the original order was restored, allowing the Revenue's appeal.