2010 (7) TMI 399 - AT - Central Excise

Penalty shortage of inputs Non-maintenance of accounts No explanation regarding shortage Denial of cenvat credit clandestine removal of goods - , to presume unexplained shortage as amounting to clandestine removal without any further corroboration is not justified - Order of the Commissioner (Appeals) modified to the extent of restoring a penalty of Rs. 25,000/- under Rule 15 of the Cenvat Credit Rules, 2004

Summary

Issues:
1. Shortage of MS plates in factory premises
2. Denial of Cenvat credit and imposition of penalties
3. Contestation of penalties before the Commissioner (Appeals)
4. Admittance of shortage by the respondent
5. Lack of corroboration for clandestine removal
6. Liability for penalty due to irregular maintenance of accounts

Analysis:
1. The case involved a situation where officers found a shortage of MS plates in the factory premises of the respondent, leading to the denial of Cenvat credit and imposition of penalties. The shortage was admitted by the authorized signatory, who could not provide a satisfactory explanation for it.

2. The original authority, based on a show cause notice alleging clandestine removal of inputs, ordered the denial of Cenvat credit and imposed penalties on both the respondent firm and the manager. The penalties included an amount equal to the denied credit, a penalty on the firm under the Central Excise Rules, and a penalty on the manager.

3. The respondent did not contest the duty liability but challenged the penalties before the Commissioner (Appeals). The Commissioner set aside the penalties imposed by the original authority, citing the lack of corroboration for clandestine removal and the fact that the duty was paid before the issuance of the show cause notice.

4. During the proceedings, the authorized signatory's admission of the shortage was highlighted, along with the failure to explain the reasons behind it. The lack of proper account maintenance regarding the disposal of inputs for which Cenvat credit was availed was noted.

5. The Tribunal acknowledged the respondent's failure in maintaining proper accounts but emphasized that presuming unexplained shortages as clandestine removal without further corroboration was unjustified. The Commissioner's decision to find no corroboration for clandestine removal was upheld, although the respondent was held liable for a penalty due to irregular account maintenance.

6. In the final judgment, the Tribunal modified the Commissioner's order by restoring a penalty on the respondent firm under the Cenvat Credit Rules but rejected the appeal seeking restoration of the penalty on the manager. This decision was based on the lack of specific findings attributing knowledge or intention to evade duty payment to the manager.