2008 (1) TMI 763 - AT - Central Excise

Summary

Issues involved: Detection of stock shortage, payment of duty, imposition of penalty, invocation of Section 11AC, evidence of clandestine removal, penalty on Director, demand of duty based on invoices and GRs, non-appearance before investigating officers, excessive penalty amount.

Summary:

The case involved the detection of stock shortage at the appellant's factory during a visit by Central Excise officers, leading to the payment of duty by the appellants before the issuance of a show cause notice. A subsequent show cause notice proposed a demand of duty and penalty, which was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).

The appellant argued that penalty under Section 11AC could not be invoked as they had paid the duty before the notice was issued. They also contended that there was no evidence of clandestine removal of goods, and therefore, penalties under Section 11AC and Rule 13 of Cenvat Credit Rules were not justified. Additionally, the appellant no. 2, a Director, claimed no knowledge of any alleged clandestine removal and objected to the imposition of penalties.

After considering the submissions from both sides and examining the records, the Tribunal found that there was no evidence of clandestine removal of goods, rendering penalties under Section 11AC and Rule 13 unsustainable in relation to the detected stock shortage.

However, concerning the demand of duty based on specific invoices and GRs, the Tribunal upheld the duty demand of Rs. 38,568. It was noted that despite explanations provided by the appellant, the presence of duplicate invoices and unissued invoices indicated a case of clandestine removal, justifying the duty demand and an equal penalty under Section 11AC.

Regarding the penalty imposed on appellant no. 2, it was acknowledged that while the penalty was justified due to his involvement in the clearance of goods, the amount was deemed excessive. The penalty was reduced to Rs. 10,000.

In conclusion, the Tribunal upheld the demand of duty and penalty under Section 11AC related to specific invoices and GRs, while setting aside the penalties on the shortage of input and finished goods. The appeal was disposed of accordingly.