2012 (12) TMI 916 - AT - Central Excise

Wrong availment of CENVAT Credit - Shortage of goods - Invoices not in the name of company - Held that - shortage is admittedly because of removal on cash basis and wrong availment of Cenvat credit took place and the company could not produce evidence showing inputs. As regards wrong availment of cenvat credit in respect of 100% EOU, it can be said that the same is technical in nature, in view of the fact that there have been such similar instances before this Tribunal earlier. Therefore, it cannot be said that the appellant Co. is an exceptional one. Having regard to the fact that there is no evidence of clandestine removal other than shortage and the fact that the statement of director was not fully inculpatory, leniency as regards quantum of penalty is warranted. Accordingly, penalty imposed on the director is reduced - Decided partly in favour of assessee.

Summary

Issues:
1. Shortage of finished goods leading to duty liability
2. Shortage of raw materials and incorrect Cenvat credit availed
3. Penalty imposed on the director under Rule 25 of the Central Excise Rule, 2002

Analysis:
1. The appellant, a director of a manufacturing company, was involved in a case where shortages of finished goods, raw materials, and incorrect Cenvat credit were identified, resulting in duty liability. The company did not dispute the demand and paid duty, interest, and penalty. The director appealed against the penalty of Rs.5 lakh imposed on him.

2. The appellant's consultant argued that the company's offense was technical, and considering the substantial amount already paid as penalty, requested a reduction in the director's penalty. The director claimed ignorance of the reasons behind the discrepancies. The appellant's consultant emphasized the lack of evidence implicating the director.

3. The respondent's representative contended that the offenses were not merely technical, highlighting the shortage of finished goods due to cash-based removals and incorrect credit availed on non-company invoices. The absence of evidence for input receipt was emphasized as a serious offense, justifying the penalty on the director.

4. The judge, after hearing both sides, decided to address the appeal directly due to the nature of the issues. The claim that the offense was purely technical was dismissed. The shortage of goods and incorrect credit were deemed significant, while the incorrect Cenvat credit related to 100% EOU was considered technical but not exceptional. The lack of evidence for clandestine activities and the director's partially exculpatory statement led to a reduction in the director's penalty to Rs.1,00,000.

5. Ultimately, the penalty on the director was reduced due to the specific circumstances of the case, with the judge considering the nature of the offenses, the lack of evidence for certain claims, and previous tribunal decisions. The appeal and stay application were disposed of accordingly.