2015 (12) TMI 1261 - AT - Central Excise

Duty demand - Clandestine removal of goods - demand on alleged shortage/ excess quantity of finished goods and inputs - Held that - Even the excess found stock of finished goods i.e. quoted Duplex boards were laying in the factory at the time of visit of the Preventive Officers. It is also not the case of the Department that the shortage quantity of goods has been removed from the factory clandestinely, in view of the fact that neither in the SCN nor in the orders passed by the lower authorities, there is any mention to that effect. Hence in absence of any tangible evidence that the goods have been removed clandestinely by the appellant, I agree with the submissions of the Ld. Advocate that non-maintenance of proper records by the factory supervisor of the appellant has resulted in shortage/ excess in the stock of the goods. However considering the fact that the appellant has not maintained proper records, which is statutorily required to be maintained, I am of the view that the appellant is liable to pay the redemption fine and the penalty imposed by the authorities below. However considering the gravity of the case, I am of the view that the ends of justice will be met if the penalty imposed under Rule 25 of the Central Excise Rules is reduced to ₹ 20,000/- and penalty imposed under Rule 15 of the Cenvat Credit Rules is reduced to ₹ 25,000 - redemption fine can also be reduced to ₹ 67,441/- i.e. equal to the Central Excise duty payable on removal of impugned goods. - Decided partly in favour of asseessee.

Summary

Issues:
- Duty demand on alleged shortage/excess quantity of finished goods and inputs upheld by Commissioner (Appeals)
- Imposition of redemption fine and penalties under Central Excise Rules and Cenvat Credit Rules challenged in appeal before Tribunal

Analysis:

Issue 1: Duty Demand Upheld
The appellant, engaged in manufacturing Kraft Paper and Duplex Board, faced duty demand due to excess stock of quoted Duplex boards and shortages in Kraft paper and cenvatable raw materials. The Preventive Officers detected the discrepancies during a physical verification, leading to a Show Cause Proceedings and subsequent adjudication order confirming duty demand and penalties. The Commissioner (Appeals) upheld the duty demand and penalties, albeit reducing the penalty amounts imposed under the Central Excise and Cenvat Credit Rules. The Tribunal found that the discrepancies were due to the appellant's failure to maintain proper records, resulting in the shortage/excess in stock. While acknowledging the liability for redemption fine and penalties, the Tribunal reduced the penalties significantly, considering the appellant's lack of proper record-keeping but also ensuring justice by reducing the redemption fine to an amount equal to the Central Excise duty payable on the removed goods.

Issue 2: Challenge on Redemption Fine and Penalties
The appellant contended that proper weighment of goods was not conducted during the investigation, and no weighment slips were provided by the Department. The appellant argued that the goods were not clandestinely removed, as they were available in the factory. The appellant also highlighted the insignificance of the shortages compared to the overall material handled. The Department countered by asserting that since the shortages/excess were admitted by the appellant and the duty paid voluntarily, the confiscation of excess goods and imposition of penalties were justified. The Tribunal noted that there was no evidence of clandestine removal and agreed with the appellant's submission regarding the lack of proper records leading to discrepancies. However, the Tribunal upheld the liability for redemption fine and penalties, albeit reducing the penalty amounts significantly to align with the circumstances and statutory requirements.

In conclusion, the Tribunal partly allowed the appeal by reducing the penalties imposed under the Central Excise and Cenvat Credit Rules and adjusting the redemption fine to reflect the Central Excise duty payable on the impugned goods, emphasizing the importance of proper record-keeping and statutory compliance in excise matters.