2007 (4) TMI 113 - AT - Central Excise

Demand and penalty - Revenue contended that appellant admitted shortage of finished goods but not present any evidence in his support and accordingly demand and penalty made - Held that revenue contention was correct and demand and penalty sustained

Summary

Issues:
1. Shortage and excess of finished goods during stock verification.
2. Justification of demand of duty, penalty, and interest.
3. Bar on limitation for issuing show cause notice.
4. Admissibility of explanations provided by the appellant.
5. Corroboration of reasons for shortage with evidence.
6. Applicability of penalty under Section 11AC or Rule 25.
7. Reduction of penalty amount.

Analysis:

Issue 1: The case involved a situation where there was a shortage and excess of finished goods during a stock verification conducted by Central Excise Officers at the appellant's factory.

Issue 2: The Assistant Commissioner issued a show cause notice proposing a demand of duty on the shortage of finished goods, along with penalty and interest. The adjudicating authority confirmed the demand of duty, imposed an equal amount of penalty, and levied interest. The Commissioner (Appeals) upheld this decision.

Issue 3: The appellant argued that the show cause notice issued after the discovery of shortage was barred by limitation. The appellant relied on the decision of the Tribunal in a similar case to support this contention.

Issue 4: The appellant's representative contended that explanations provided by the appellant regarding the shortage and excess of goods were valid and that no verification was conducted based on these explanations.

Issue 5: The Revenue's representative argued that the reasons provided by the appellant for the shortage were not supported by evidence, and therefore, the charge of clandestine removal was appropriate.

Issue 6: The Tribunal found that the appellant did not produce any evidence for the removal of stock from the bonded store room, justifying the demand of duty. However, the imposition of penalty under Section 11AC or Rule 25 was deemed not justified.

Issue 7: The Tribunal reduced the penalty amount to Rs. 10,000 due to the shortage of material during stock verification, acknowledging a contravention of rules and the Act.

In conclusion, the Tribunal rejected the appeal, maintaining the demand of duty but reducing the penalty amount based on the findings related to the shortage of finished goods and lack of evidence supporting the appellant's explanations.