2008 (3) TMI 586 - AT - Central Excise

Summary

Issues:
1. Duty payment on shortage of inputs during stock verification.
2. Imposition of penalty under Rule 13 of Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944.
3. Allegation of clandestine removal of goods.

Analysis:

Issue 1: Duty payment on shortage of inputs during stock verification
The Appellants, engaged in manufacturing MS Tubes and Galvanized Steel Tubes, faced a shortage of inputs during a stock verification conducted by Central Excise officers. The General Manager of the Appellants explained the reasons for the shortage, attributing it to operational processes like slitting and rolling coils. The Appellants promptly debited the duty on the same day as per the RG 23-A, Part II Account. The Adjudicating Authority confirmed the duty demand, which was also upheld by the Commissioner (Appeals).

Issue 2: Imposition of penalty under Rule 13 of Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944
The Appellants contended that the shortage was not indicative of clandestine removal of goods as they immediately paid the duty upon detection. They argued that there was no evidence of clandestine activities. Citing precedents, the Appellants challenged the imposition of penalty under Section 11AC of the Act. The Tribunal noted that the mere shortage of goods, without additional evidence or corroboration, does not establish clandestine removal. Given the absence of intent to evade duty payment, the Tribunal set aside the penalty imposed under Rule 13 of Cenvat Credit Rules, 2002, Rule 25 of Central Excise Rules, and Section 11AC of the Act.

Issue 3: Allegation of clandestine removal of goods
The Department alleged that the Appellants failed to provide a definite explanation for the shortage, leading to the presumption of clandestine clearance of goods. However, the Tribunal found that the Revenue did not present any concrete evidence supporting the claim of clandestine removal. Relying on previous decisions, the Tribunal emphasized that a mere shortage, without further substantiation, does not establish clandestine activities. As there was no indication of collusion, fraud, or willful misstatement to evade duty payment, the penalty under Section 11AC of the Act was deemed inapplicable. Consequently, the penalty was set aside, and the appeal was allowed with consequential relief.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, New Delhi highlights the issues of duty payment on input shortage, penalty imposition, and the allegation of clandestine removal, providing a comprehensive overview of the legal proceedings and the Tribunal's decision.