2015 (10) TMI 1117 - AT - Central Excise

Penalty u/s 11AC - Shortage of goods - Held that - If there is only shortage and no cogent evidence has been produced. Therefore, charge of clandestine removal of the goods is not sustainable. Admittedly, in this case except shortage no cogent evidence has been produced on record. Further, I find that to impose penalty under Section 11AC read with Rule 25 of the Central Excise Rules 2002, the ingredients of provision of Section 11AC are necessary, i.e., fraud, collusion, wilful misstatement, suppression of facts or contraventions of provision with an intent to evade payment of duty. Admittedly, all these ingredients are absent in the case. Only there is a mere shortage of stock. Therefore, I hold that penalty under Section 11AC or Rule 25 of the Central Excise Rules, 2002 is not imposable on the appellant. - Decided in favour of assessee.

Summary

Issues: Penalty under Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002.

Analysis:
1. The case involved a challenge to the penalty imposed on the appellant under Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. An investigation revealed shortages of finished goods at the appellant's premises, leading to the imposition of a penalty. The lower authorities confirmed the demand and penalty, which was later reduced by the First Appellate Authority to &8377; 50,000. The appellant appealed this decision.

2. The appellant's counsel argued that the mere shortage of finished goods does not prove clandestine removal without concrete evidence. The Commissioner (A) acknowledged this but still imposed the penalty. The Assistant Commissioner supported the findings of the impugned order.

3. After hearing both parties and considering the submissions, it was noted that the Commissioner (A) found no concrete evidence of clandestine removal apart from the shortages. For a penalty under Section 11AC to be imposed, elements like fraud, collusion, wilful misstatement, or suppression of facts must be present. Since these were absent and only shortages were identified, the penalty was deemed unjustified.

4. The judgment concluded that without substantial evidence beyond the shortages, the charge of clandestine removal could not be sustained. As the necessary elements for imposing a penalty under Section 11AC were not met, the penalty on the appellant was set aside. The appeal was disposed of accordingly.