2009 (1) TMI 728 - AT - Central Excise

Summary

Issues:
1. Shortage of finished goods found during verification.
2. Duty demand and penalties imposed under Section 11AC and Rule 26.
3. Applicability of proviso to Section 11AC regarding penalty calculation.
4. Appeal against imposition of penalty on the appellant company.

Analysis:
1. The case involved a situation where the appellant's factory was inspected, revealing a shortage of finished goods compared to the recorded balance in the register. The duty involved on the missing goods was Rs. 3,08,147, part of which was debited, and the balance was paid later. Statements by the partner of the appellant initially cited reasons for the shortage related to personal matters, but later admitted that goods were removed without duty payment, leading to duty demand and penalty proceedings.

2. The Assistant Commissioner confirmed the duty demand and imposed penalties on the appellant firm under Section 11AC and on the partner under Rule 26. On appeal, the Commissioner upheld the duty demand and Section 11AC penalty but set aside the penalty on the partner. The appeal was specifically against the penalty imposed on the appellant company under Section 11AC.

3. The appellant's counsel argued that since the duty on the missing goods was paid before the show cause notice was issued, the penalty should be limited to 25% of the duty amount as per the proviso to Section 11AC. Citing relevant case law, the counsel contended that the penalty should not be equal to the duty amount. The Departmental Representative defended the impugned order.

4. The Tribunal considered both sides' submissions and acknowledged that the duty on the missing goods had been paid in full before the show cause notice. Therefore, the Tribunal applied the proviso to Section 11AC, reducing the penalty to 25% of the duty amount. The Tribunal relied on the precedent set by the Delhi High Court in similar cases. Consequently, the penalty under Section 11AC was modified, reducing it to 25% of the duty demand, and the appeal was disposed of accordingly.