2008 (8) TMI 707 - AT - Central Excise

Summary

Issues:
- Shortage of stocks of inputs found during stock verification leading to duty demand and penalty imposition under Section 11AC of the Central Excise Act, 1944.
- Dispute over penalty imposition due to alleged clandestine removal of goods without proper explanation by the Respondent.
- Interpretation of mens rea requirement for penalty imposition in cases of duty evasion.

Analysis:
The case involved the Respondents, engaged in manufacturing M.S. Pipes, facing duty demand and penalty imposition due to shortage of stocks of inputs found during a visit by Central Excise Officers. The Adjudicating Authority confirmed the duty demand and imposed a penalty under Section 11AC of the Central Excise Act, 1944, which was later set aside by the Commissioner (Appeals), leading to the Revenue filing an appeal. The key contention was the alleged clandestine removal of goods by the Respondent without adequate explanation for the shortage.

The Learned DR representing the Revenue reiterated the findings of the Commissioner (Appeals), arguing that the Respondent's failure to provide reasons for the shortage indicated possible clandestine removal of inputs, justifying the penalty imposition. On the other hand, the Learned Advocate for the Respondent also supported the Commissioner (Appeals) findings and cited relevant case laws to strengthen their argument against the penalty imposition based on mens rea requirement for duty evasion.

Upon reviewing the case records, the Tribunal observed that the shortage was admitted by the Respondent, who promptly deposited the duty without evidence of fraud or intentional evasion. Citing the decision of the Hon'ble Punjab & Haryana High Court, the Tribunal emphasized the necessity of establishing mens rea or intentional evasion to justify penalty imposition. In this case, no evidence was presented to prove clandestine removal of goods, and the show cause notice was issued three years after the incident without proper justification, leading the Tribunal to uphold the Commissioner (Appeals) decision to set aside the penalty and reject the Revenue's appeal.

In conclusion, the Tribunal found no grounds to interfere with the Commissioner (Appeals) order, emphasizing the importance of establishing mens rea for penalty imposition in cases of duty evasion and highlighting the lack of evidence supporting the allegations of clandestine removal of goods by the Respondent. The appeal filed by the Revenue was thus dismissed, and the decision was pronounced on 14-8-2008.