2011 (4) TMI 802 - AT - Central Excise

Penalty u/s 11AC - clandestine removal - duty paid before SCN was issued - Held that - Since, appellants have not contested the allegation about shortage of the goods and removal of the same without payment of duty and without preparing invoices before the original authority and before the Commissioner (Appeals) therefore, it is a clear case of admitted clandestine removal and provisions of section 11AC is clearly attracted - This is also not fit case for waiver issue of show cause notice on the ground that duty involved stands paid as it is case of removal without preparing invoices. The alternative submission of the assessee that the original authority and the Commissioner (Appeals) have not granted an option to pay reduced penalty in terms of proviso to Section 11AC and therefore the same should be extended to them at this stage in the light of the decision K.P.Pouches Pvt.Ltd. vs. Union of India 2008 (1) TMI 296 - HIGH COURT OF DELHI deserves to be accepted - Decided against of assessee.

Issues:
1. Shortage of non alloy steel wire rods found during a visit to the premises.
2. Admission of shortage and clandestine removal of goods by the authorized signatory.
3. Payment of duty after admission of shortage.
4. Imposition of penalty under Section 11AC.
5. Contestation of penalty imposition and invocation of reduced penalty option.

Shortage of Goods:
The case involved a substantial shortage of 87.400 MT of non alloy steel wire rods discovered during an inspection. The authorized signatory admitted to the shortage and disclosed that the goods were sold on a cash basis to unidentified buyers without issuing invoices or paying Central Excise duty. The duty was eventually paid on 10.1.2005, and this admission was not retracted throughout the proceedings.

Payment of Duty and Penalty Imposition:
The appellants argued that since the duty was paid promptly after the shortage was discovered, the penalty under Section 11AC should not have been imposed. They contended that no show cause notice should have been issued as the duty was already paid, and if a penalty were to be applied, it should be reduced to 25% of the duty amount. However, the department maintained that the admission of shortage and clandestine removal warranted the penalty under Section 11AC.

Judgment Analysis:
The Tribunal carefully reviewed the submissions and records, emphasizing the significant quantity of missing goods and the admission of their unauthorized sale. It was noted that the appellants did not contest the allegations of shortage and removal without duty payment at any stage of the proceedings. The Tribunal concluded that the case clearly fell under admitted clandestine removal, justifying the application of Section 11AC for penalty imposition.

Reduced Penalty Option:
The Tribunal, while upholding the penalty under Section 11AC, acknowledged the appellant's argument regarding the lack of an opportunity to avail the reduced penalty provision as per the proviso to Section 11AC. Citing a relevant decision, the Tribunal extended the option to pay a reduced penalty amount of Rs.63,859 within thirty days. Failure to comply within the specified period would result in an increased penalty of Rs.2,55,436.

Final Decision:
In conclusion, the appeal was rejected, and the penalty under Section 11AC was upheld. However, the appellant was granted the opportunity to pay a reduced penalty amount within thirty days, failing which a higher penalty would be applicable.

This detailed analysis of the judgment covers the issues of shortage of goods, admission of unauthorized removal, duty payment, penalty imposition under Section 11AC, and the provision of an option for reduced penalty payment.

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