2010 (9) TMI 588 - AT - Central Excise

Penalty - Clandestine removal of the inputs - The statement was not a simple admission; the admission was qualified one - The admission of removal of inputs was qualified by the statement that the said removal was not done by the authorised signatory but it was done by the staff of the factory and in the absence of authorised signatory - There was no material disclosed in the show cause notice which could reflect the intention on the part of the respondents to evade or avoid payment of duty - The essential ingredient of Section 11AC of the Act is the intention to evade duty - That was totally absent in the show cause notice, there was no question of imposition of penalty by the adjudicating authority. There was absolutely no case for the department even to file the appeal before the Commissioner (Appeals) - order passed by the Commissioner to justify filing of the appeal clearly reflect non application of mind.the appeal is dismissed.

Summary

Issues:
Appeal against dismissal of penalty imposition for shortage of goods; Failure to establish intention to evade duty; Lack of evidence on clandestine removal; Abuse of process of law by the department.

Analysis:
The appeal stemmed from the Commissioner (Appeals) dismissing the department's appeal against the adjudicating authority's decision not to impose a penalty on the respondents for a duty demand. The adjudicating authority refrained from penalty citing lack of evidence linking the shortage of goods to clandestine removal, a finding upheld by the Commissioner (Appeals).

The Departmental Representative failed to demonstrate that the issue justifying penalty under Section 11AC of the Central Excise Act was raised in the show cause notice. The respondent's authorized signatory admitted the shortage of goods, but the admission was qualified, stating the removal was done by factory staff without his knowledge. The show cause notice did not investigate the admission's genuineness, and the department did not dispute it, indicating a lack of intent to evade duty.

The lower authorities found no evidence of clandestine removal of goods apart from the respondent's statement. The judgment criticized the department for filing an appeal without sufficient grounds, labeling it an abuse of the legal process. The judgment highlighted the requirement under Section 35EA of the Act for the department to assess the need for an appeal to prevent unnecessary litigation and expenses.

Ultimately, the appeal was dismissed due to the absence of evidence establishing an intention to evade duty and the lack of support for the department's claims of clandestine removal. The judgment emphasized the importance of applying legal provisions to avoid frivolous appeals and unnecessary legal proceedings, leading to the disposal of the appeal.