2014 (11) TMI 537 - HC - Central Excise

Penalty u/s 11AC - Forged invoices produced - Excess stock found in factory - Held that - Non-accountal of 20% of the 12 MM bars and 100% of the 16 MM bars, which could not be explained by the assessee, could not be attributed to the manufacturing loss, as in the case of integrated cement plants. The non-accountal in the absence of explanation, of such large quantity in respect of specified products, even if the quantity of such finished products, in comparison with the total production was very small, attracted the provisions of Section 11AC of the Act and Rule 25 of the Rules for proceedings of penalty and confiscation. The intention to evade payment of excise duty is to be gathered from the entirety of the circumstances. It is a finding of fact with which the High Court would not ordinarily interfere unless the finding can be assailed on the non-existence of the material available on record - Decided against assessee.

Summary

Issues:
- Central Excise Appeal against Customs, Excise and Service Tax Appellate Tribunal's order
- Excess stock of HSD Bars found during inspection
- Confiscation of excess stock and imposition of penalty
- Interpretation of Board Circular and previous case laws
- Application of penalty under Section 11AC
- Discrepancy in stock explained as manufacturing loss or deliberate deception

Analysis:
The case involved a Central Excise Appeal against the order of the Customs, Excise and Service Tax Appellate Tribunal, where the appellant company, a manufacturer of HSD Bars, was found with excess stock during an inspection. The Central Excise Officers discovered an excess stock of 27.560 M.T. of 12 MM HSD Bars and 45 M.T. of 16 MM HSD Bars over the recorded balance in the RGI Register, leading to a value of about &8377; 14.49 lakhs. The officers seized the goods and issued a show cause notice, resulting in the confiscation of the excess stock and imposition of a penalty under Section 11AC of the Act.

The Commissioner (Appeals) and the Tribunal had differing views on the confiscation, with the Tribunal emphasizing the lack of substantial evidence of clandestine clearance or intent to evade duty. The Tribunal also noted discrepancies in the excess stock percentages for different bar sizes, questioning the explanation provided by the company. Additionally, the Tribunal differentiated the applicability of the Board's Circular dated 23-9-1999 to integrated steel plants only, not to units like the appellant's.

The appellant argued that the penalty under Section 11AC should only be imposed when specific conditions are met, such as deliberate intent to evade duty. The appellant cited various case laws to support the argument that penalties should not be levied in cases of genuine mistakes or technical discrepancies. However, the Central Excise Department contended that the significant variations in stock, especially the 100% excess of 16 MM bars, indicated deliberate deception to avoid excise duty payment.

The High Court dismissed the Central Excise appeal, upholding the Tribunal's decision on the confiscation and penalty. The court emphasized that the non-accountal of significant quantities of specific products without adequate explanation could not be attributed to manufacturing loss and indicated an intent to evade payment of excise duty. The court relied on established legal principles to support the decision, highlighting the importance of factual findings and the intention to evade duty in such cases.

In conclusion, the judgment affirmed the confiscation and penalty imposed on the appellant, emphasizing the need for clear explanations for discrepancies in stock levels and the intent to evade excise duty. The ruling underscored the application of Section 11AC and relevant legal precedents in determining penalties for non-compliance with excise regulations.