2003 (9) TMI 663 - AT - Central Excise

Summary

Issues:
Appeal against dropping of penalty under Rule 173Q while confirming duty demand.

Analysis:
The appeal was filed against the dropping of a penalty of Rs. 10,000 confirmed on the respondents under Rule 173Q while upholding the duty demand of Rs. 49,193 due to shortages of raw material and finished goods. The respondents filed cross-objections reiterating the correctness of the impugned order and sought a decision on merits. The learned JDR argued that the penalty should not have been dropped as the duty was deposited before the show cause notice, claiming it was not voluntary but done upon the insistence of Central Excise Officers.

Upon review, the Judge found the JDR's contention valid. The Central Excise Officers discovered shortages of raw material and finished goods in the factory of the respondents, leading to a duty demand. The respondents failed to provide a satisfactory explanation for the shortages. The Manager of the respondents attributed the discrepancies to the illness of their part-time accountant, but this explanation lacked supporting evidence and was rightly rejected. It was evident that the shortages were due to clandestine removal of goods by the respondents, who only deposited the duty after being caught by the department to avoid the penalty under Rule 173Q.

The Judge disagreed with the Commissioner (Appeals) who had dropped the penalty based on precedents cited by the respondents. Unlike those cases, the respondents in this instance had acted with a mala fide intention by evading duty payment through clandestine removal of goods. The subsequent duty deposit was deemed a strategic move to avoid penalties. Imposing the penalty was considered crucial to deter such unscrupulous practices and prevent rampant evasion of duties.

Consequently, the Judge set aside the order dropping the penalty on the respondents and reinstated the penalty of Rs. 10,000 while confirming the duty demand in full. The appeal by the Revenue was allowed, and the cross-objections of the respondents were rejected.