2015 (11) TMI 1595 - AT - Central Excise

Shortages in the physical stock of the finished goods/raw materials - imposition of penalty - Held that - the appellant company are entitled to pay 25% of the penalty imposed under section 11AC of CEA,1944 subject to fulfilment of condition laid down there in. I also find force in the contention of the ld.Advocate that there is no direct evidence against the Director Shri Vijay Kumar Jalan, on his involvement relating to the discrepancies in the stock noticed, and no finding against him discussing his role in the said shortages in stock had been recorded by the authorities below. Accordingly, the personal penalty imposed on the Director deserves to be set aside. In view of above, the impugned Order is modified and the appellant company s appeal is partly allowed to the above extent and the appeal filed by the Director Shri Vijay Kumar Jalan is allowed. Appeals disposed off.

Summary

Issues:
1. Confirmation of duty and penalty on shortages in stock of inputs and finished products.
2. Entitlement of the appellant company to avail 25% penalty benefit.
3. Validity of personal penalty imposed on the Director.

Issue 1: Confirmation of duty and penalty on shortages in stock:
The case involved shortages in the physical stock of inputs and finished goods noticed during a visit by Central Excise officers, leading to a demand notice for duty payment. The appellant argued that discrepancies were due to non-entry of earlier production in registers and inaccurate stock-taking methods. However, the Revenue contended that the appellant failed to justify the discrepancies and penalties were rightly imposed. The Tribunal upheld the demand and penalties, stating that the appellant's explanations lacked evidence and proper justification. The concurrent findings of the authorities below were deemed valid due to the appellant's failure to provide cogent evidence on the shortages.

Issue 2: Entitlement to 25% penalty benefit:
The appellant claimed they were not given the opportunity to avail the 25% penalty benefit as prescribed under Section 11AC of the Central Excise Act, 1944. Citing a judgment of the Hon'ble Gujarat High Court, the Tribunal agreed with the appellant's argument. The Tribunal noted that the appellant should have been given the option to pay a reduced penalty amount within a specified period, as per legal provisions. Consequently, the appellant company was entitled to pay 25% of the penalty imposed under Section 11AC, subject to fulfilling the conditions laid down in the relevant provision.

Issue 3: Validity of personal penalty on the Director:
Regarding the personal penalty imposed on the Director, the appellant argued that there was no direct evidence implicating the Director in the stock discrepancies. The Tribunal agreed with the appellant's contention, stating that no findings against the Director's involvement were recorded by the authorities below. As a result, the personal penalty imposed on the Director was deemed unsustainable and set aside. The Tribunal modified the impugned order, partly allowing the appeal of the appellant company and fully allowing the appeal filed by the Director.

In conclusion, the Appellate Tribunal CESTAT KOLKATA upheld the confirmation of duty and penalties on stock shortages, granted the appellant company the benefit of paying 25% of the penalty, and set aside the personal penalty imposed on the Director due to lack of evidence implicating him in the discrepancies. The judgment provided a detailed analysis of each issue raised, considering the arguments presented by both parties and relevant legal provisions.