2008 (6) TMI 540 - AT - Central Excise

Summary

Issues:
1. Confirmation of demand of duty and penalty under Section 11AC of Central Excise Act, 1944.
2. Applicability of penalty under Section 11AC in the absence of evidence of clandestine removal of goods.

Analysis:
1. The case involved the confirmation of demand of duty and penalty under Section 11AC of the Central Excise Act, 1944. The respondents were engaged in the manufacture of Rigid PVC Plain Films and Metallised Polyester Films. Central Excise officers found a shortage of finished goods during a stock verification on 16-3-2005. The respondents admitted the shortage and immediately deposited the duty. The Adjudicating Authority confirmed the demand of duty amounting to Rs. 63,452/- and imposed a penalty of an equal amount under Section 11AC. The Commissioner (Appeals) set aside the penalty, leading the Revenue to file an appeal.

2. The Revenue argued that the penalty was set aside without considering the merits of the case and based on the fact that the duty was deposited before the issue of a show cause notice. However, the learned Advocate contended that there was no allegation of clandestine removal of goods. Citing a decision by the Hon'ble Punjab & Haryana High Court in a similar case, it was highlighted that the non-levy or short levy of duty must be proven to be actuated by an intention to evade payment of duty for penalty under Section 11AC to be justified.

3. Upon review, the Tribunal found that there was no evidence of clandestine removal of goods by the respondents. The Adjudicating Authority acknowledged that the duty was paid upon the detection of the shortage during stock verification. It was noted that the shortage was not adequately explained by the authorized signatory, but there was no material to support the claim of clandestine removal. Referring to the decision of the Hon'ble Punjab & Haryana High Court, the Tribunal concluded that in the absence of proof of intention to evade duty, the penalty under Section 11AC was not warranted. Consequently, the Tribunal rejected the appeal filed by the Revenue, upholding the decision of the Commissioner (Appeals).

In conclusion, the Tribunal ruled in favor of the respondents, emphasizing the necessity of establishing intention to evade duty for the imposition of penalty under Section 11AC. The absence of evidence supporting clandestine removal of goods led to the rejection of the Revenue's appeal.