2010 (1) TMI 1079 - AT - Central Excise

Summary

Issues involved: Duty demand on finished goods, duty demand on shortage of inputs, penalty imposition under Rule 173Q and Section 11AC.

Duty demand on finished goods: The appellant, engaged in manufacturing Galvanised Steel Strips, faced duty demand of Rs. 31,301/- on finished goods and Rs. 1,50,495/- on shortage of inputs. The General Manager admitted the shortage but argued that it did not prove clandestine removal. The appellant contended that duty liability was discharged, stock taking was not done properly, and penalty under Rule 173Q(1) with Section 11AC could not be sustained without proof of clandestine removal.

Duty demand on shortage of inputs: The appellant argued that penalty for shortage of inputs should have been imposed under Rule 57(I) of Modvat Rules, not Rule 173Q of Central Excise Rules. They maintained that duty liability on inputs was already discharged before the show cause notice was issued.

Penalty imposition under Rule 173Q and Section 11AC: The Department argued that penalty under Rule 173Q and Section 11AC was justified due to the General Manager's admission of removing goods without paying duty. However, the appellant contended that penalty should have been imposed under Rule 9(2) for contravention of provisions, not under Rule 173Q.

Judgement: The Tribunal considered the submissions and relevant paragraphs of the show cause notice. It noted the Manager's admission of shortage and upheld the duty payment already made by the appellants. Regarding penalty, the Tribunal referenced a previous case where penalty was not imposed solely based on admission of clandestine removal without corroborative evidence. It concluded that penalty under Section 11AC was not applicable, but penalty under Rule 9(2) and Rule 173Q could be imposed for contraventions of specific rules. For shortage of inputs, the Tribunal agreed with the appellant that penalty under Rule 57(I) should have been invoked instead of Rule 173Q. Ultimately, a penalty of Rs. 10,000/- under Rule 173Q(a)(b) and (d) of Central Excise Rules, 1944 was deemed sufficient.

Conclusion: The Tribunal upheld duty demand on finished goods, confirmed duty payment on inputs, and imposed a penalty under Rule 173Q for the shortage without evidence of clandestine removal.