2009 (5) TMI 634 - AT - Central Excise

Summary

Issues:
- Detection of shortage of inputs during stock verification
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944
- Contention regarding clandestine removal of goods
- Interpretation of relevant legal precedents

Analysis:

The case involved the detection of a shortage of inputs during a stock verification conducted by Central Excise officers at the appellant's factory. The shortage involved central excise duty amounting to Rs. 1,69,728, which the authorized signatory of the appellant admitted and debited. The original authority confirmed the duty demand and imposed a penalty under Section 11AC of the Central Excise Act, 1944, equal to the duty amount. The Commissioner (Appeals) later reduced the penalty to Rs. 43,000.

The appellant did not contest the duty demand but disputed the invocation of Section 11AC, arguing that there was no evidence of clandestine removal of goods. The appellant's advocate cited a decision of the Punjab and Haryana High Court to support this contention. On the other hand, the Departmental Representative (D.R.) contended that the penalty reduction by the Commissioner (Appeals) was justified, as the appellant failed to provide a satisfactory explanation for the shortage, implying clandestine removal.

The Tribunal, after considering the arguments and perusing the records, noted that the appellant's authorized signatory attributed the shortage to the shifting of stock by workers, with no evidence of clandestine removal. Referring to the Punjab and Haryana High Court decision, the Tribunal emphasized that penalty under Section 11AC can be imposed even in the absence of conclusive evidence of clandestine removal, provided mens rea is present. The Tribunal highlighted a case where the penalty was set aside due to a lack of tangible evidence of clandestine removal. Consequently, the Tribunal found no justification for imposing the penalty under Section 11AC.

Therefore, the Tribunal set aside the penalty imposed under Section 11AC of the Central Excise Act, allowing the appeal with consequential relief. The decision was dictated and pronounced in open court by the presiding judge.