2009 (10) TMI 791 - AT - Central Excise

Shortage in the stock of main input i.e. M.S. Ingots - clandestine removal - Held that - there was no protest by the appellants that the stock taking was done on eye estimation and no actual weighment was done and the protest against the same was nowhere made by the appellants before issuing the show cause notice and the same was admitted by the appellants and accordingly they paid the duty without any protest - duty demand of such clandestine removal upheld. CENVAT credit - Rule 12 of CCR 2002 - denial on the ground that original duty paid invoice was not produced - Held that - similar issue decided in the case of Union of India v. Kataria Wires Ltd. 2007 (1) TMI 183 - MADHYA PRADESH HIGH COURT wherein it was held that merely because of original and duplicate copy lost claim not to be defeated especially when certified copy issued by Superintendent - CENVAT Credit taken by the appellant on the strength of Xerox copy of invoice certified by the Range Superintendent stands allowed. Penalty u/s 11AC - Held that - when the issue of clandestine removal is decided against the appellant equivalent amount of penalty is imposable against the appellants - although the appellants have paid the duty demand but failed to pay the interest on applicable rates within prescribed time limit the benefit of the proviso of Section 11AC is not available to the appellants and the penalty liable of equivalent amount of duty is confirmed. Appeal allowed - decided partly in favor of assessee.

Issues involved:
1. Shortage of finished goods and inputs detected during a visit by Preventive Officers.
2. Imposition of Central Excise duty on the shortage.
3. Penalty imposed on the Director of the company.
4. Maintainability of penalty against the deceased Director.
5. Allegations of clandestine removal and evasion of Central Excise duty.
6. Disallowance of Cenvat Credit on the basis of missing original duty paid invoice.
7. Arguments regarding the shortage determination, clandestine removal, and Cenvat Credit.
8. Imposition of penalty under Section 11AC for suppression of facts.
9. Confirmation of duty demand, interest, and penalty.

Detailed Analysis:
1. The main issue in this case was the shortage of finished goods and inputs discovered during a visit by Preventive Officers. The Central Excise duty on this shortage was paid by the appellant without protest upon detection by the officers.

2. The penalty was imposed on the Director of the company, and there was a question regarding the maintainability of the penalty against the deceased Director. The appellant argued that the penalty against the deceased Director should not be upheld, citing relevant case law.

3. The case involved allegations of clandestine removal and evasion of Central Excise duty. The appellant disputed the department's findings, claiming that the shortage determination was based on surmises and lacked strong evidence like excess electricity consumption or supplier statements.

4. The disallowance of Cenvat Credit was based on the missing original duty paid invoice. The appellant argued that the credit taken based on a xerox copy certified by the Range Superintendent was admissible, citing relevant judgments to support their contention.

5. The appellant contended that the penalty under Section 11AC should not be imposed as there was no suppression of facts, and the department failed to prove clandestine removal with supporting evidence. They also argued that if the penalty was to be confirmed, it should be reduced as the duty demand was already paid before the show cause notice.

6. The Respondent argued that the shortage was admitted by the appellant, and the correctness of the physical verification was not challenged until the show cause notice was issued. They maintained that in cases of clandestine removal, direct evidence may not be available, and circumstantial evidence can be used to establish the offense.

7. The Tribunal found that the penalty liability on the deceased Director could not be upheld based on relevant case law. On the issue of clandestine removal, the duty demand was confirmed as the appellant did not protest the findings and paid the duty without objection.

8. Regarding the Cenvat Credit taken based on a xerox copy of the invoice, the Tribunal allowed it, citing a relevant High Court judgment. The penalty under Section 11AC was upheld as the appellant failed to pay interest within the prescribed time limit, making them liable for an equivalent penalty amount.

9. In conclusion, the Tribunal disposed of the appeals, confirming the duty demand, interest, and penalty, while allowing the Cenvat Credit taken on the basis of the certified xerox copy of the invoice.

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