2012 (12) TMI 970 - CGOVT - Central Excise

Imposition of penalty - Theft of goods - Clandestine removal of goods - Applicability of Rule 4 - Held that - Fact of looting/robbery, which also led to murder of security guard of applicant s factory premise, has not been disputed. As such, the applicant was a victim of theft incident. Under such circumstances, provisions of Rule (4) of the said rules cannot be applied as the applicant, a manufacturer, has not removed the goods unauthorisedly. Further, there is no specific allegation in Show Cause Notice or impugned orders that the goods were removed by the applicant in unauthorised manner from their factory premises. Theft has occurred in spite of taking all possible preventing measures by the applicant. - this is not a case where the applicant has applied for remission of duty under Rule 21 of the Central Excise Rules, 2002. Applicant has already deposited the demand amount of ₹ 49,147/-. In view of this position there is no case for imposition of penalty since there is no clandestine removal of goods by the applicant. As such, Government sets aside the penalty imposed on the applicant - Decided in favour of assessee.

Issues:
1. Duty demand on stolen goods
2. Penalty imposition for theft
3. Application of Rule 4 of Central Excise Rules, 2002
4. Allegations of clandestine removal
5. Invocation of Section 11AC
6. Case laws in support

Analysis:

1. Duty demand on stolen goods:
The case involved the theft of excisable goods from the applicant's manufacturing premises. The applicant reported the theft and furnished details to the department, stating the amount of Central Excise duty involved. The authorities issued a Show Cause Notice proposing recovery of duty on the stolen goods removed without payment. The original authority confirmed the duty demand with interest and imposed a penalty equal to the confirmed duty demand. The applicant appealed, but the Commissioner (Appeals) upheld the decision.

2. Penalty imposition for theft:
The applicant argued that the penalty under Rule 25 should not apply as theft occurred despite preventive measures taken. The Commissioner linked the penalty provision with clandestine removal, which was not specifically alleged in the Show Cause Notice or the Order-in-Original. The applicant contended that equivalent penalty is mandatory only in cases covered by Section 11AC, which was not invoked in this case.

3. Application of Rule 4 of Central Excise Rules, 2002:
The Government found that Rule 4, which prohibits the removal of excisable goods without payment of duty, did not apply in this case as the goods were stolen, not removed by the applicant. The theft incident, leading to the murder of a security guard, was not disputed. The Government noted that the applicant had not removed the goods unauthorizedly and had already deposited the demanded duty amount.

4. Allegations of clandestine removal:
The Government observed that there was no evidence of clandestine removal by the applicant. The theft occurred despite the applicant taking preventive measures. The penalty provision under Rule 25 was not applicable in this context.

5. Invocation of Section 11AC:
The applicant argued that Section 11AC, which mandates equivalent penalty, was not invoked as there was no allegation in the Show Cause Notice to attract it. The Government concurred and set aside the penalty imposed on the applicant.

6. Case laws in support:
The applicant relied on case laws to support their contentions regarding the theft incident and the imposition of duty and penalty. The Government considered these arguments in the context of the case.

In conclusion, the Government set aside the penalty imposed on the applicant, modifying the Order-in-Appeal accordingly. The revision application was disposed of in favor of the applicant.

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