2013 (8) TMI 535 - AT - Central Excise

Shortage in Stock on inquiry Failure to explain the shortages Held that - Shortage of 32.174 M.T. of final product Party s repeated failure to explain the reasons for the said shortage which is substantial in nature - It is clear that the party has surreptitiously cleared the said final products without payment of appropriate duty and without observing the mandatory formalities - Supressed the facts of such removal, with intention to evade the payment of duty - Thereby attracting the proviso to Section 11 A (1) of the Central Excise Act, 1944 Also, in the case of Nabha Steels Limited versus Commissioner Central Excise, Chandigarh 2004 (169) E.L.T. 345 (Tri.-Del.) shortage of Ingots was found on physical verification and admitted by the Director and the duty involved was debited. Penalty was imposed - Facts are almost similar in this case. Decided in favor of Revenue. 25% of Penalty paid Held that - Correct as per legal provisions and Board s circular No.831/08/2006 Dt. 26.07.2006 - 100% penalty should be levied - Once respondent have exercised the option to pay 25% penalty within specified time it is correct in view of facts and legal provisions. Decided against the Revenue.

Summary

Issues:
1. Duty demand under Section 11A (1) of the Central Excise Act, 1944
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944
3. Reduction of penalty by Commissioner (Appeals) to 25% of the duty amount
4. Allegation of suppression of facts and debarment of amnesty
5. Consideration of interest payment

Analysis:

1. The case involves a duty demand under Section 11A (1) of the Central Excise Act, 1944, amounting to Rs.52,493, against a company engaged in the manufacture of M.S. Ingots. The demand was based on a shortage of 32.174 M.T. of material detected during a physical verification by the anti-evasion wing of Central Excise. The company failed to explain the shortage, leading to the conclusion that material had been cleared surreptitiously to evade duty payment.

2. The Assistant Commissioner confirmed the duty demand and imposed a penalty of Rs.52,493 under Section 11AC of the Act, which was challenged by the company in an appeal before the Commissioner (Appeals). The Commissioner upheld the duty demand but reduced the penalty to 25% of the duty amount already paid by the company. This reduction was based on the provisions of Section 11AC, which allow for a lower penalty if the duty and interest are paid within 30 days of the issuance of the Show Cause Notice.

3. The main issue raised in the appeal before the Tribunal was whether the Commissioner (Appeals) was correct in restricting the penalty to 25% of the duty amount within the specified timeframe. The department alleged suppression of facts and requested modification of the Commissioner's order. The Tribunal considered the legal provisions of Section 11A (1) and Section 11AC, which outline the penalties for non-payment or short-payment of duty, especially in cases involving fraud, misstatement, or suppression of facts.

4. The Tribunal noted that the company had voluntarily paid the duty and 25% of the penalty within the stipulated time, as per the optional scheme introduced to expedite tax collection and reduce litigation. The company's accountant admitted the shortage of goods and expressed willingness to pay the duty. The Tribunal emphasized that the penalty reduction was in line with legal provisions and the Board's circular, which allowed for such settlements in cases of voluntary payment within the specified timeframe.

5. Ultimately, the Tribunal rejected the revenue's appeal, affirming the Commissioner (Appeals)'s decision to reduce the penalty to 25% of the duty amount already paid by the company. The judgment highlighted the importance of adherence to legal provisions, voluntary compliance, and the optional settlement scheme introduced to streamline tax collection processes.