2009 (5) TMI 709 - AT - Central Excise

Summary

Issues:
Clandestine removal of goods, Penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:

Clandestine Removal of Goods:
The case involved the manufacture of PVC Leather cloth where Central Excise officers detected shortages of inputs and finished goods involving central excise duty. The authorized signatory of the company admitted the shortages and explained that the goods were cleared without payment of duty. Additionally, a truck carrying finished goods was intercepted without any central excise invoice, indicating a clear case of clandestine removal of goods.

Penalty under Section 11AC:
The appellant argued that penalty under Section 11AC was not warranted as they had deposited the duty before the issuance of the show cause notice, citing a decision by the Hon'ble Rajasthan High Court. However, the Departmental Representative contended that the case involved fraud or suppression of facts, making the provision of Section 11AC applicable. The Tribunal agreed with the Department's view, stating that the mere deposit before the notice does not negate the situation mentioned in Section 11AC.

Legal Precedents:
The Tribunal referred to the decision of the Hon'ble Punjab & Haryana High Court in a similar case, where it was held that if goods were cleared without payment of duty, Section 11A(2B) would not apply. The Tribunal also considered a decision by the Hon'ble Delhi High Court, which reduced the penalty to 25% of the duty amount if the duty demanded was paid within 30 days of the order. In this case, the penalty was reduced to Rs. 47,643, which is 25% of the duty amount.

In conclusion, the Tribunal upheld the penalty under Section 11AC due to the clandestine removal of goods and reduced the penalty amount to 25% of the duty paid before the issuance of the show cause notice, following legal precedents and interpretations of relevant provisions of the Central Excise Act, 1944.