2007 (11) TMI 42 - AT - Central Excise

Shortage of inputs admitted by appellant but no admission about clandestine removal No corroboration made of private records or statement of concerned persons Penalty u/s 11AC not imposable As credit on those inputs have reversed immediately on detection so interest u/s 11AB not justified

Summary

Issues: Department's appeal against Commissioner (Appeals) order - shortage of inputs leading to credit reversal, imposition of penalty, demand of interest, invocation of Section 11AC, applicability of interest under Section 11AB

In this case, the Department appealed against the Commissioner (Appeals) order regarding the shortage of inputs noticed during a visit to the respondent's unit, which led to the reversal of credit amounting to Rs.2.04,572. The original authority imposed a penalty of Rs.50,000 under Section 11AC and demanded interest for the period from 1.9.96 to 28.2.97. The Commissioner (Appeals) set aside the penalty and interest demand. The Department relied on various judgments to support its case. The Tribunal noted that the shortage was admitted by the respondent, who promptly reversed the credit. However, there was no admission of clandestine removal, and the Tribunal emphasized the seriousness of such a charge. Mere shortage without corroborating evidence cannot lead to the invocation of Section 11AC. Therefore, the Tribunal held that this case was not suitable for invoking Section 11AC.

Regarding the demand of interest, the Commissioner (Appeals) found that the entire credit amount was paid on the same day the shortage was noticed. The liability for interest under Section 11AB starts from the month succeeding the one in which the credit was taken. Since there was no admission or proof of clandestine removal, the interest cannot be presumed from a date before the officers' visit. As the credit was reversed promptly, the Commissioner's decision not to uphold the interest demand was deemed reasonable and legal. Consequently, the Tribunal rejected the Department's appeal, upholding the Commissioner (Appeals) decision on both penalty and interest issues.