2010 (3) TMI 955 - AT - Central Excise

Summary

Issues involved: Stock shortage of raw materials, recovery of Cenvat credit, penalty on company and director, maintenance of stock accounts, liability under Section 11AC.

Summary:
The appeals arose from an Order-in-Appeals regarding a stock shortage of raw materials at the appellant company, M/s. Rhydburg Pharmaceuticals Ltd. The Director admitted the shortage and paid the credit involved. The Department alleged clandestine removal of goods, leading to penalty proposals. The Chartered Accountant argued lack of evidence for clandestine removal, citing a Supreme Court decision. The Department contended that the shortage indicated clandestine removal, holding the company and Director liable for penalties. The Tribunal noted the admitted shortage, upheld the duty demand, reduced the penalty under Section 11AC, and set aside the penalty on the Director. The company was found liable for penalty under Rule 27 for improper stock account maintenance.

The Tribunal considered submissions from both sides, noting the presence of witnesses during stock taking and the Director's admission of shortage. The Original Authority and Commissioner (Appeals) found the shortage indicative of clandestine removal. The company's failure to account for inputs led to the duty demand confirmation. The Tribunal modified the penalty under Section 11AC to a lesser amount under Rule 27, citing improper stock account maintenance as the basis for penalty imposition.

In conclusion, the duty demand was confirmed, the penalty under Section 11AC was reduced, and the penalty on the Director was set aside. The company was held liable for penalty under Rule 27 for inadequate stock account maintenance.