2010 (4) TMI 1035 - AT - Central Excise

Summary

Issues involved: Central Excise Duty shortage, Penalty imposition u/s 11AC and Rule 26, Clandestine removal of goods.

Central Excise Duty shortage: The Respondent company was found with a shortage of 25,781 litres of Organic Composite Solvent (OCS) during a stock taking exercise, leading to a duty demand of Rs. 1,02,031. Despite admitting the shortage and paying the duty the next day, no satisfactory explanation was provided. A show cause notice was issued, and penalties were imposed on both the company and its authorized signatory.

Penalty imposition u/s 11AC and Rule 26: The Assistant Commissioner upheld the duty demand and imposed penalties on the Respondent company and the authorized signatory. On appeal, the penalty on the company and the signatory was set aside by the Commissioner (Appeals) citing lack of evidence of clandestine removal and the prior payment of duty on the goods found short.

Clandestine removal of goods: The Revenue filed appeals against the Commissioner (Appeals) order seeking restoration of penalties on the Respondent company and its authorized signatory based on the suspicion of clandestine removal due to the unexplained shortage of goods found during stock taking.

The Tribunal, after considering the submissions and records, concluded that the significant quantity of OCS found short indicated clandestine removal. As per Section 11AC and Rule 26, penalties were warranted for the Respondent company and its authorized signatory. The Tribunal held that the Commissioner (Appeals) erred in setting aside the penalties and restored the Order-in-Original, allowing the Revenue's appeals.