2011 (6) TMI 628 - AT - Central Excise

Shortage clandestine removal - shortage of goods in four different categories of finished goods Held that - authorised signatory vide his statement recorded under Section 14 admitted the shortage but strangely expressed his inability to explain shortage cannot be presumed to be a case of clandestine removal in the absence of other evidence corroborating the same - however charge of improper maintenance of accounts is established - duty demand along with interest is upheld Penalty imposed under Section 11AC is converted into a penalty under Rule 25 and the same is reduced

Issues:
1. Shortage of goods in the appellant's factory as per stock verification.
2. Validity of duty demand, interest, and penalty imposed on the appellants.
3. Accuracy of stock taking method and explanation for discrepancies.
4. Receipt of personal hearing intimation and its impact on the case.
5. Allegation of clandestine removal and penalty under Section 11AC.

Shortage of Goods:
The case involved discrepancies in stock during a verification visit to the appellant's factory, revealing shortages in finished goods. The shortages were significant, with values exceeding Rs.10 lakh and varying between 40% to over 85% in different categories of goods. The authorised signatory admitted the shortages but failed to provide a satisfactory explanation, leading to the issuance of a show cause notice and subsequent duty demand.

Validity of Duty Demand, Interest, and Penalty:
The Commissioner (Appeals) upheld the duty demand, interest, and penalty imposed on the appellants based on the shortage of goods. The appellant contested the shortage claim, arguing that the stock taking method was not accurate and that they did not receive the personal hearing intimation. However, the tribunal noted the substantial shortages, lack of explanation, and the appellant's failure to respond adequately, leading to the decision to uphold the duty demand and interest.

Accuracy of Stock Taking Method and Explanation for Discrepancies:
The appellant challenged the accuracy of the stock taking method, claiming it was based on an average method that was not precise. They also disputed the shortage allegations, emphasizing the lack of evidence supporting clandestine removal. The tribunal acknowledged the discrepancies but found the appellant's arguments insufficient to disprove the shortages or explain the discrepancies adequately.

Receipt of Personal Hearing Intimation:
The appellant raised concerns about not receiving the personal hearing intimation, but the tribunal found this claim dubious due to the consistent address details provided by the appellant across various communications. Despite the appellant's assertion, the Commissioner (Appeals) had granted personal hearings and thoroughly examined the case, leading to the conclusion that the lack of response from the appellant weakened their position.

Allegation of Clandestine Removal and Penalty under Section 11AC:
While shortages were established, the tribunal noted that not every shortage implied clandestine removal without corroborating evidence. The lack of further investigation and the signatory's inability to explain the shortages raised doubts about the clandestine removal charge. Consequently, the penalty under Section 11AC was converted to a penalty under Rule 25, reducing it significantly from Rs. 1,77,477 to Rs. 50,000.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Delhi highlights the issues, arguments presented, and the tribunal's decision on each aspect of the case, ensuring a comprehensive understanding of the legal proceedings and outcomes.

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