2012 (11) TMI 822 - AT - Central Excise

Demand and penalty shortage of input allegation of clandestine removal of goods Held that - Merely because the assessee chooses not to contest the demand on account of shortages, so as to avoid litigations, by itself, does not mean that allegation of clandestine removal stand established against him, especially in the absence of any corroborative evidence to that effect - no justifiable reasons to impose penalty upon the appellant

Summary

Issues:
1. Confirmation of demand of duty
2. Imposition of penalty based on shortages of raw materials
3. Allegation of clandestine removal without evidence
4. Applicability of penalty under Section 11AC

Confirmation of demand of duty:
The appellant, engaged in manufacturing excisable goods, faced proceedings due to shortages of raw materials found during a visit to their factory. The duty involved in the shortages was confirmed and upheld through various levels of adjudication, leading to the present appeal. The appellant did not contest the demand of duty, which was ultimately confirmed as not being contested.

Imposition of penalty based on shortages of raw materials:
The appellant's representative admitted the shortages in raw materials, attributing them to factors like excess wastage and wrong accounting. The appellant's advocate argued against the penalty, stating that the shortages did not involve clandestine removal of raw materials as there was no evidence of clearance without payment of duty. The Tribunal referred to previous cases where penalties were set aside due to lack of evidence of clandestine removal, emphasizing that admission of shortages does not automatically imply illicit removal.

Allegation of clandestine removal without evidence:
The Tribunal highlighted that the duty demand was solely based on shortages of final products, with no concrete evidence of clandestine removal presented. Citing precedents where penalties were annulled due to insufficient proof of clandestine removal, the Tribunal emphasized the importance of corroborative evidence to support such allegations.

Applicability of penalty under Section 11AC:
The Revenue argued for the imposition of penalty under Section 11AC since the appellant did not challenge the duty confirmation. However, the Tribunal noted that the decision not to contest the demand, to avoid litigation, does not automatically establish clandestine removal without additional corroborative evidence. Consequently, the Tribunal found no justifiable reason to impose a penalty on the appellant and set it aside while confirming the demand of duty.

In conclusion, the Tribunal set aside the penalty imposed on the appellant, emphasizing the lack of evidence supporting the allegation of clandestine removal and the importance of corroborative proof in such cases. The demand of duty was confirmed as uncontested, highlighting the distinction between shortages and illicit removal in excise matters.