2008 (5) TMI 107 - AT - Central Excise

Whether penalty can be imposed if there is found shortage of stock duty deposited immediately on date of detection of shortage - there is nothing to suggest that shortage of stock was by reason of fraud collusion etc. - it is clear that mere contravention of provisions is not enough unless there is also intention to evade payment of duty - Shortage of stock may arise in various situations not necessarily reflecting intention to evade payment of duty penalty not imposable

Summary

Issues:
Appeal against penalty imposition under Rule 25 of Central Excise Rules and Section 11AC of the Central Excise Act.

Analysis:
The appeal was taken up ex parte as per the respondent's request to decide on merit. The Revenue appealed against the Commissioner (Appeals) order, which dismissed the Department's appeal against the Assistant Commissioner's penalty imposition under Rule 25 of Central Excise Rules and Section 11AC of the Central Excise Act. The Commissioner held that as the duty was deposited upon detection of shortages, penalty imposition was not justified. The Commissioner relied on Tribunal decisions and clarified that the Supreme Court's dismissal of a case does not affirm the judgment's merit. The High Court's decision in another case was referred to, emphasizing that depositing duty before a show-cause notice does not negate penalty imposition under Section 11AC.

The analysis further delves into the legal provisions under Section 11A and 11AC of the Central Excise Act. It was highlighted that Section 11A(2B) allows duty payment before a notice is served, but Section 11AC applies when there is fraud, collusion, misstatement, suppression of facts, or contravention of Act/Rules with intent to evade duty payment. In this case, there was no indication of fraud or collusion leading to stock shortage. The imposition of penalty under Rule 25 was deemed appropriate, and the appeal seeking penalty under Section 11AC was considered misconceived. Mere contravention of provisions does not automatically imply an intention to evade duty payment, as stock shortages can occur without such intent.

Conclusively, the President of the Tribunal declined to modify or cancel the Commissioner's order, dismissing the appeal. The decision was based on the absence of evidence suggesting intentional evasion of duty payment, emphasizing that depositing duty before a show-cause notice does not absolve liability to penalty. The judgment was dictated and pronounced in open court, upholding the Commissioner's decision regarding penalty imposition under Rule 25 and rejecting the appeal for penalty under Section 11AC.