2009 (2) TMI 620 - AT - Central Excise

Penalty - Shortage of goods - Clandestine removal - evidence - Held that - It is a clear case of admitted shortage of finished excisable goods on the day of visit by the Officers and the duty involved stands paid and the same is not in dispute. However, the charge of clandestine removal is a severe one and requires to be proved by evidence such as transport document, recovery of excess stock or payment for the unaccounted clearances and statements of the concerned persons admitting clandestine removal. In this particular case, the admission is only relating to shortage of the finished goods. No other evidence which can substantiate the finding by the original authority that the goods were cleared clandestinely has been relied upon. Under these circumstances, the decision of the Commissioner (Appeals) in setting aside the penalty imposed under Section 11AC is in order The original authority has imposed penalty on the authorized signatory holding that he was not only having knowledge/full control over the day-to-day affairs of the party and that he was aware of all the activities being carried out in the factory of clandestine removal of the goods found short, as well as he was actively involved in such fraudulent removals. This inference is not supported by any evidence. The only admission is the admission of shortage by Shri Rajesh Agrawal. Therefore, there was no justification for imposition of penalty on Shri Rajesh Agrawal also. Appeal dismissed.

Summary

Issues:
Appeal against setting aside penalties imposed on two appellants for shortage of goods involving duty, applicability of Section 11AC, permissibility of composite penalty under Section 11AC read with Rule 25, interpretation of shortage as clandestine removal, reliance on High Court decisions, powers of adjudication of the Joint Commissioner.

Analysis:
The case involved two appeals by the Department challenging the order of the Commissioner (Appeals) setting aside penalties imposed on two appellants due to the shortage of goods involving duty. The shortage was discovered during a stock taking visit to the factory, and the duty on the shortage was voluntarily debited. The Department argued that the shortage was significant, not explained by the authorized signatory, and should be considered as clandestinely removed goods under Section 11AC. The Department contended that the penalties should not have been set aside by the Commissioner (Appeals).

The Advocate for the respondent supported the Commissioner's decision and cited legal precedents to argue against the imposition of penalties. The Advocate highlighted the Gujarat High Court decision in CCE v. R.G. Agarwal and the Punjab and Haryana High Court decision in CCE v. Sigma Steel Tubes. Additionally, the Advocate questioned the powers of adjudication of the Joint Commissioner in cases like the present one, emphasizing the need for specific notifications granting such powers.

After considering the submissions from both sides, the Judge analyzed the evidence presented. The Judge noted that while there was an admitted shortage of finished goods, the charge of clandestine removal required additional evidence such as transport documents or statements proving fraudulent activities. The Judge found that the mere shortage of goods without supporting evidence did not warrant penalties under Section 11AC. The Judge also disagreed with the imposition of penalties on the authorized signatory, as there was no substantial evidence linking him to the alleged fraudulent activities.

Ultimately, the Judge upheld the decision of the Commissioner (Appeals) to set aside the penalties, stating that there were no valid grounds to interfere with that order. The Judge did not delve into other issues raised by the Advocate, and the appeals were rejected.