2006 (11) TMI 482 - AT - Central Excise

Cenvat/Modvat - Interest - Cenvat/Modvat - Interest - Clandestine removal - Proof - Loss due to evaporation

Summary

Issues involved:
- Appeal against Commissioner's Order
- Discrepancy in stock of raw materials
- Clearance of materials without excise invoices
- Demand for duty, penalty, and interest
- Consideration of accumulated losses
- Applicability of Rule 57-I(4) for interest
- Penalty imposition under Section 11AC
- Interpretation of Supreme Court judgments
- Reduction of penalty

Analysis:
1. Appeal against Commissioner's Order:
The appeal was made against the Commissioner's Order confirming the original authority's decision regarding the discrepancy in stock of raw materials and clearance of materials without excise invoices.

2. Discrepancy in stock of raw materials:
The officers found a significant difference between the stock available as per the books and the actual stock of raw materials during a visit. The appellant company admitted to the clearance of materials without preparing excise invoices.

3. Demand for duty, penalty, and interest:
A show cause notice was issued demanding duty for a specific period, which was confirmed by the adjudicating authority. The Commissioner (Appeals) upheld this decision, imposing a penalty equal to the duty amount and demanding interest.

4. Consideration of accumulated losses:
The appellant argued that some raw materials were lost due to evaporation and accumulated losses, which were not considered. They presented a certificate from a Professor of Mumbai University, directing the consideration of such losses.

5. Applicability of Rule 57-I(4) for interest:
The appellant contended that the interest liability upheld by the Commissioner (Appeals) was not legal as it related to a period before the applicability of Rule 57-I(4). They argued against the payment of interest based on a circular.

6. Penalty imposition under Section 11AC:
The appellant challenged the penalty equal to the duty imposed, citing that Rule 57-I(4) could not be invoked retroactively. They referred to a Supreme Court judgment to support their argument.

7. Interpretation of Supreme Court judgments:
The Tribunal considered the arguments presented by both sides, including references to Supreme Court judgments regarding the imposition of penalties under Section 11AC and the retrospective application of rules.

8. Reduction of penalty:
While penalty under Section 11AC was deemed not applicable, the Tribunal acknowledged the case of duty paid inputs being removed without appropriate duty payment. Consequently, the penalty was reduced to Rs. 30,000 based on the facts of the case.

In conclusion, the appeal was partly allowed, with the Tribunal reducing the penalty imposed on the appellant company after a detailed analysis of the discrepancies, demands for duty, penalty, and interest, as well as the applicability of relevant rules and Supreme Court judgments.