2010 (2) TMI 995 - AT - Central Excise

Clandestine removal - shortage of stock - corroborative evidence could be found to prove clandestine removal or not - penalty - Held that - It may be stated that occurrence of shortage itself found by physical verification proves against the assessee in absence of substantial pleading backed by evidence. This is sufficient to impose penalty on the appellant. Shri Maheshwari being authorised representative and he failed to explain how the stock was found short and did not lead any evidence to prove his innocence, he also deserves to be penalised under law. When imposition of penalty comes and becomes necessary, date of payment of duty is relevant to examine concession in penalty whether grantable. The case shows that assessee has paid duty on 15-5-2006 which has been appropriated - Since ld. Adjudicating authority has already imposed penalty and the case falls within the purview of third proviso to Section 11AC of the Central Excise Act 1944, assessee is entitled to the concessional penalty - penalty shall be reduced to 25% of the duty of ₹ 2,05,272/- imposed by adjudication order. Penalty on Shri Kailash Chand Maheshwari - Held that - He does not rule out his role in occurrence of shortage. Therefore penalty of ₹ 10,000/- imposed on him by adjudication order is confirmed. Appeal allowed in part.

Summary

Issues:
Penalty imposition under Section 11AC of Central Excise Act, 1944 on the appellant and the authorized representative for shortage of stock without proper explanation.

Analysis:
The judgment by the Appellate Tribunal CESTAT NEW DELHI involved the imposition of penalties under Section 11AC of the Central Excise Act, 1944. The Adjudicating Authority had imposed a penalty of Rs. 2,05,272 on the appellant due to a shortage of stock, with an additional penalty of Rs. 10,000 on the authorized representative. The Adjudicating Authority found that the appellant failed to explain the shortage of stock, leading to suspicions about their modus operandi. The absence of a satisfactory defense and explanation for the missing goods indicated questionable conduct, justifying the penalty to prevent revenue loss. The Adjudicating Authority's decision was based on the lack of evidence and explanations provided by the appellant and the authorized representative. The Appellate Authority, however, granted relief by waiving the penalties, stating that no evidence of clandestine removal was found.

Upon reviewing the case, the Appellate Tribunal found that the Adjudicating Authority's reasoning and findings were not adequately considered. The Tribunal highlighted that the shortage of stock, as confirmed by physical verification, was sufficient grounds for imposing penalties due to the lack of substantial explanations or evidence from the appellant. The Tribunal emphasized that the absence of a credible defense or explanation indicated questionable conduct, justifying the penalty under Section 11AC. The Tribunal also noted that the authorized representative failed to provide any evidence or explanation, further supporting the penalty imposition.

Regarding the payment of duty and the applicability of the third proviso to Section 11AC, the Tribunal determined that since the duty was paid on a specific date and the penalty had already been imposed, the appellant was entitled to a reduced penalty of 25% of the duty amount. As for the authorized representative, the Tribunal confirmed the penalty of Rs. 10,000 due to his involvement in the occurrence of the stock shortage. Ultimately, the Tribunal partly allowed the Revenue's appeal, upholding the penalties imposed on the appellant and the authorized representative based on the findings of the Adjudicating Authority and the provisions of the Central Excise Act, 1944.