2008 (11) TMI 554 - AT - Central Excise

Summary

Issues:
1. Allegation of clandestine removal of goods against parallel invoices.
2. Imposition of penalty under Section 11AC and interest under Section 11AB.
3. Validity of Commissioner (Appeals) order setting aside penalty and interest.

Analysis:

Issue 1: Allegation of clandestine removal of goods against parallel invoices
The case involved the recovery of 11 sale invoices from the factory premises of the Appellant, where discrepancies were found in the quantity and consignee details compared to the records. The duty amount of Rs. 3,06,538/- was paid by the Appellant after the recovery. The Revenue issued a show cause notice for interest and penalty. The Asstt. Commissioner confirmed the duty demand and imposed penalty and interest. The Commissioner (Appeals) set aside the penalty and interest, citing previous judgments. The Department argued that duty payment before the show cause notice does not absolve the Appellant of penalty and interest. The Appellant contended that paying duty does not imply acceptance of the allegation of clandestine removal without concrete evidence. The Tribunal emphasized the seriousness of the charge and upheld the duty payment as not absolving the Appellant from penalty and interest if clandestine removal is proven.

Issue 2: Imposition of penalty under Section 11AC and interest under Section 11AB
The Departmental Representative argued that payment of duty before the show cause notice does not exempt the Appellant from penalty and interest if clandestine removal is established. Citing a High Court judgment, it was highlighted that the presence of mens rea is crucial for imposing penalty under Section 11AC. The Appellant's Counsel contended that paying duty does not equate to accepting the allegation of clandestine removal without concrete evidence. The Tribunal noted the lack of evidence from the Department regarding clandestine removal and upheld the applicability of penalty and interest if such removal is proven.

Issue 3: Validity of Commissioner (Appeals) order setting aside penalty and interest
The Commissioner (Appeals) set aside the penalty and interest based on the duty payment before the show cause notice. However, the Tribunal found this reasoning unsustainable, citing a High Court judgment that duty payment before the notice does not preclude the imposition of penalty under Section 11AC if the elements, including mens rea, are satisfied. The Tribunal emphasized the seriousness of the charge of clandestine removal and upheld the applicability of penalty and interest if proven. The Commissioner (Appeals) order was set aside, and the Revenue's appeal was allowed.

This detailed analysis of the judgment highlights the key issues of clandestine removal, penalty imposition, and the validity of the Commissioner (Appeals) order, providing a comprehensive understanding of the legal proceedings and decisions involved in the case.