2009 (4) TMI 706 - AT - Central Excise

Summary

Issues:
Shortage of finished goods and inputs during stock verification, Barred by limitation, Imposition of penalty under Section 11AC.

Analysis:
1. Shortage of finished goods and inputs during stock verification:
The case involved shortages of stock detected during stock verification on two occasions. The authorized signatory of the assessee admitted the shortages and voluntarily paid the duty before the issuance of show cause notices. The contention that stock taking was not conducted properly was rejected as the shortages were admitted and duty paid without protest. The Tribunal upheld the demand of duty, stating that the show cause notices were not barred by limitation and that the shortages were not based on mere eye estimation but were actual discrepancies. The appeals filed by the assessee against the demand of duty were rejected.

2. Barred by limitation:
The authorized signatory of the assessee explained that the shortage of finished goods was due to wrong intimation by unskilled labor, and there was no evidence of clandestine clearance of goods. The Tribunal referred to a High Court case to emphasize that imposition of penalty under Section 11AC required the presence of mens rea and other elements. As there was insufficient evidence to prove clandestine clearance, the Tribunal upheld the decision of the Commissioner (Appeals) to set aside the penalties imposed by the original authority. The appeals filed by the Revenue regarding the imposition of penalties were also rejected.

3. Imposition of penalty under Section 11AC:
The Tribunal concluded that there was no reason to interfere with the order of the Commissioner (Appeals) regarding the imposition of penalties under Section 11AC. It was noted that the High Court had emphasized the need for satisfying various elements, including mens rea, for imposing such penalties. As there was a lack of evidence to prove clandestine clearance, the penalties were not warranted. Consequently, all appeals were rejected, affirming the decisions made by the lower authorities.

In summary, the Tribunal upheld the demand of duty due to shortages detected during stock verification, rejected the contention of being barred by limitation, and dismissed the imposition of penalties under Section 11AC based on insufficient evidence of clandestine clearance of goods.