2007 (3) TMI 612 - AT - Central Excise

Summary

Issues:
1. Penalty imposition under Section 11AC of the Central Excise Act, 1944 for duty deposit before show cause notice issuance.
2. Disallowance of deemed credit and penalty imposition under Rule 27 of the Central Excise Rules, 2002.

Analysis:
1. The appeal was filed by the Revenue against the Commissioner (Appeals) setting aside a penalty on the grounds that duty was deposited before the show cause notice. The Revenue argued that despite duty deposit after detection by the Central Excise Officer, the penalty should be imposed under Section 11AC. The Revenue relied on a decision by the Punjab and Haryana High Court. However, the Tribunal found that there was no evidence of wilful removal of inputs, and since duty was paid upon detection of shortages, Section 11AC could not be invoked. The penalty under Rule 27 was upheld but reduced to Rs. 10,000.

2. The respondent's representative contended that shortages were found during stock verification but not evidence of clandestine removal. The Commissioner (Appeals) had modified the disallowed deemed credit amount, which was deposited before determination by the adjudicating authority. The Tribunal noted that no duty evasion due to fraud or wilful misstatement occurred. While acknowledging the breach of rules, the Tribunal set aside the penalty under Section 11AC. However, a penalty under Rule 27 was imposed but reduced to Rs. 10,000 due to the circumstances of the case.

In conclusion, the Tribunal upheld the penalty under Rule 27 but reduced it to Rs. 10,000, setting aside the penalty under Section 11AC due to the immediate duty payment upon detection of shortages and the lack of evidence of wilful removal. The appeal was rejected based on the facts and circumstances of the case.