2013 (8) TMI 310 - AT - Central Excise

Penalty under Section 11AC of the Central Excise Act Allegation of fraud not mentioned in the Show-Cause Notice Held that - Fraud, collusion and any other such ingredient has not been mentioned either in the show cause notice or in the order in original. In the absence of which it is difficult to sustain the penalty equal to duty amount in the present case Decided against the Revenue.

Summary

Issues:
- Imposition of penalty under Section 11 AC of the Central Excise Act for shortage of goods detected during physical verification.
- Reduction of penalty from Rs. 1,13,222/- to Rs. 25,000/- by Commissioner (Appeals).
- Challenge by Revenue against the reduction of penalty.
- Argument by the respondent challenging the imposition of penalty under Section 11 AC.

Analysis:
1. The appeal pertains to a case where a shortage of MS ingots was detected during a physical verification at a factory, leading to the deposit of duty by the respondents. A show cause notice was issued demanding duty and proposing penalty under Rule 25 read with Section 11 AC of the Central Excise Act. The original adjudicating authority confirmed duty, imposed a penalty of Rs. 1,13,222/-, which was later reduced to Rs. 25,000/- by the Commissioner (Appeals). The Revenue challenged this reduction, seeking an enhancement of the penalty to the initial amount.

2. The Revenue contended that since the shortage was admitted by the respondents and duty was deposited, considering it a case of clandestine removal, a penalty equal to the duty amount should be imposed under Section 11 AC. The Revenue argued that the Commissioner (Appeals) erred in reducing the penalty and requested the penalty to be enhanced back to Rs. 1,13,222/-.

3. On the other hand, the respondent's advocate argued that the ingredients required for imposing a penalty under Section 11 AC were not present in the case. They highlighted that no suppression, willful misstatement, or collusion was evident, as the duty was paid promptly after the visit by Central Excise officers. The respondent contended that without these elements, the penalty equal to the demand of duty should not be imposed.

4. The Tribunal, after considering both arguments, upheld the decision of the Commissioner (Appeals). It was noted that Section 11 AC allows for the imposition of a penalty equal to the duty only in cases involving fraud, collusion, willful misstatement, or suppression of facts. The Tribunal concurred with the Commissioner (Appeals) that these elements were not present in the case, as they were not mentioned in the show cause notice or the order-in-original. Therefore, the Tribunal rejected the Revenue's appeal and upheld the reduction of the penalty to Rs. 25,000/-.

5. In conclusion, the Tribunal found that without evidence of suppression or willful misstatement, invoking Section 11 AC to impose a penalty equal to the duty amount was unwarranted in this case. The decision of the Commissioner (Appeals) was supported, and the appeal filed by the Revenue was rejected, affirming the reduced penalty amount.

6. The appeal was ultimately rejected, and the Tribunal's decision was pronounced in the open court.