2010 (3) TMI 963 - AT - Central Excise

Shortage of inputs and finished goods - reversal of CENVAT credit - penalty u/r 13 of CCR - appellant attributed shortage as burning loss - Held that - demand of duty was upheld as they have not been able to satisfactorily account for shortage, the duty stands paid by them - however, no other evidence has been cited by them by the Department to impose penalty on the finding of clandestine removal of inputs/finished goods as held by the original authority - also, these cases filed under the ambit of Section 11A 2(b) of the Act, question of penalty in the present case does not arise - appeal rejected - decided against Revenue.

Issues:
1. Appeal by the Department against the order-in-appeal by the Commissioner.
2. Shortage of goods leading to duty demand and penalties.
3. Setting aside of penalties by the Commissioner (Appeals).
4. Applicability of Section 11A(2B) of the Act.

Analysis:
1. The judgment deals with three appeals by the Department challenging a common order-in-appeal passed by the Commissioner. The appeals involve cases of shortage of goods leading to duty demand and penalties imposed on the respondents. The appeals specifically address Appeal No. 1017/08 with Shri H.S. Steel (P) Ltd. as respondent, and Appeal No. E/1019/08 with M/s. Mahadev Steel Industries and E/1020/08 with Shri Naresh Joshi partner of M/s. Mahadev Steel Industries as respondents.

2. In the case of Shri H.S. Steel (P) Ltd., officers found a shortage of MS ingots during a visit to the factory premises. The shortage led to a duty demand and a penalty imposed under Rule 13 of Cenvat Credit Rules. However, the Commissioner (Appeals) set aside the penalty.

3. For M/s. Mahadev Steel Industries and Shri Naresh Joshi, officers discovered a shortage of finished goods during an inspection. This shortage resulted in a duty demand and penalties imposed under Rule 25 of the Central Excise Rules and Rule 126 of the Central Excise Rules. The penalties were set aside by the Commissioner (Appeals).

4. The judgment delves into the applicability of Section 11A(2B) of the Act concerning the imposition of penalties. The Commissioner (Appeals) found that the duty was paid by the respondents due to the shortage of goods, but there was a lack of additional evidence to support the imposition of penalties for clandestine removal. Consequently, the Commissioner concluded that in cases covered under Section 11A(2B) of the Act, the question of penalty does not arise. The Tribunal upheld the Commissioner's decision, stating that the grounds of appeal did not provide sufficient facts to overturn the Commissioner's findings.

5. Ultimately, the Tribunal rejected the appeals, affirming the orders of the Commissioner (Appeals) regarding the respondents involved in the shortage of goods cases. The judgment highlights the importance of evidence and legal provisions in determining the imposition of penalties in cases of duty demand arising from shortages of goods.

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