2007 (10) TMI 526 - AT - Central Excise

Summary

Issues involved: Department's appeal against order for recovery of interest and penalty u/s 11AC set aside by Commissioner (Appeals).

Relevant facts and decision:

1. Shortage of iron and steel scrap: Officers found a shortage of 48 MT of iron and steel scrap valued at Rs. 4,56,000/- at the factory premises of the respondent. Credit had been taken amounting to Rs. 72,960/-.

2. Admission and repayment: The proprietor admitted the shortage and claimed possible reasons like burning loss, pilferage, short receipt. He immediately paid back the credit amount of Rs. 72,960/- by debiting from Cenvat credit and paying the balance through PLA.

3. Original authority's decision: Confirmed the demand of Rs. 72,960/-, imposed penalty of the same amount, and ordered recovery of interest.

4. Commissioner (Appeals) decision: Upheld the demand on the shortage but set aside the penalty and interest.

5. Appellate Tribunal's analysis: The main ground of appeal was the respondent's failure to provide a reasonable explanation for the shortage and admission of clandestine removal. The Tribunal noted that while the shortage was admitted, no admission of clandestine removal was made initially. The later admission lacked corroboration and no evidence supported it. Therefore, the Tribunal found no basis for penalty u/s 11AC. Regarding interest, as the credit had been reversed on the date of the officers' visit, and no firm date of removal was established, the Tribunal agreed with the Commissioner (Appeals) in not confirming the interest demand.

6. Decision: The appeal by the department was rejected.