2007 (2) TMI 101 - AT - Central Excise

Demand and penalty - Allegation were made against assessee is that (i) shortage of input (ii) shortage of finished good (iii) suppression of production and accordingly demand were made alongwith penalty - Held that allegation was correct and demand and penalty sustained

Summary

Issues involved:
Shortages of Inputs, Shortages of Finished Goods, Suppression of Production by Assessee No. 1 and 2

Shortages of Inputs:
The judgment addresses the physical verification of inputs, where a shortage of 475.451 MT was detected and later disputed by the Managing Director. The explanation provided for the shortage was deemed unacceptable as weighment differences and other factors were not considered valid reasons. The judgment upholds the duty demand of Rs. 7,84,494 but reduces the penalty to Rs. 1,00,000.

Shortages of Finished Goods:
In this issue, discrepancies in the physical stock of finished goods were compared with the R.G. 1 Register stock. The Managing Director accepted the shortages, which were calculated using sectional weighment method. The claim of minor differences due to actual weighment was not supported by evidence. The judgment upholds the duty demand of Rs. 1,27,801 but reduces the penalty to Rs. 50,000.

Suppression of Production by Assessee No. 1 and 2:
The judgment delves into the alleged suppression of production by the appellants, highlighting discrepancies between production reports and statutory records. The case of suppressed production was based on entries in private records maintained by Security Supervisors. However, it was noted that the production reports were not prepared after proper verification and were not done by technical persons. The judgment sets aside the demands and penalties related to unaccounted production and clearance. It upholds the penalty for misuse of Modvat credit but reduces it to Rs. 50,000. Additionally, penalties imposed on the companies and directors are set aside due to lack of evidence supporting the allegations.

In conclusion, the judgment partially allows the appeal of Assessee No. 1 and fully allows the appeals of Assessee No. 2 and the directors of both companies.