2011 (8) TMI 896 - HC - Central Excise

Clandestine removal - Whether the order of the Tribunal can be held as legal & proper where penalties imposed under Section (sic) Rule 25 of Central Excise Rule, 2002 & U/R 13 of the Cenvat Credit Rule, 2002 have been vacated - Tribunal has found that there is no material or evidence of any kind to support the findings, that there was clandestine removal, which did not tally with the physical stock - Appeal is dismissed

Summary

Issues: Limitation period for filing appeal, imposition of penalty under Central Excise Act, sufficiency of evidence for clandestine removal, interpretation of Section 11AC for levy of penalty.

In this case, the primary issue was the limitation period for filing the appeal. The stamp reporter highlighted the absence of an affidavit of service of the order report, which affected the limitation determination. However, an affidavit was filed by an Assistant Commissioner stating that the order was served on the appellant within the prescribed time, thus rendering the appeal within limitation.

Another crucial issue revolved around the imposition of penalties under the Central Excise Act. The department had appealed against the Tribunal's order vacating penalties imposed under relevant rules. The Tribunal found no evidence to support the findings of clandestine removal, which led to the penalties being vacated. The appellant cited relevant case law to argue that payment of differential duty can impact penalty liability, as outlined in Section 11AC of the Act.

The sufficiency of evidence for clandestine removal was a significant point of contention. The Tribunal's decision was based on the lack of material supporting clandestine removal findings. It was noted that a shortage of finished goods alone does not necessarily imply evasion of excise duty unless linked to concrete evidence of clandestine removal. In the absence of such evidence, the Tribunal held that no penalty could be imposed.

Interpretation of Section 11AC for the levy of penalty was extensively discussed. The Supreme Court's rulings in relevant cases were cited to emphasize that penalties under Section 11AC are meant to punish deliberate deception by the assessee with the intent to evade duty. The Court clarified that penalties are imposed for acts of deliberate deception to evade duty, as outlined in the section.

Ultimately, the Court dismissed the appeal, upholding the Tribunal's decision based on the lack of substantial evidence supporting the allegations of clandestine removal and evasion of excise duty. The judgment emphasized the importance of concrete evidence to establish liability for penalties under the Central Excise Act.