2007 (8) TMI 214 - AT - Central Excise

Shortage noticed .04% for period when no verification was done is negligible as compared to amount of Rs 18 crore of duty involved No intention to evade duty or mis-state the facts so penalty u/s 11AC not sustainable Removal of input without reversal of credit - So penalty is imposable

Summary

Issues:
1. Appeal against setting aside penalty amount by lower appellate authority.

Analysis:
The Department filed an appeal against the lower appellate authority's decision to set aside the penalty amount. The case involved the manufacture of impugned goods by the respondents in December 2002, with a subsequent joint stock verification in September 2004 revealing a shortage of 92.1 MT and the removal of inputs without reversing the credit. The duty on the shortage amounted to Rs. 1,15,865/-, and the credit for inputs cleared was Rs. 41,715/-. The respondents promptly paid the duty and interest totaling Rs. 1,57,580/- before the issuance of a show-cause notice. The lower appellate authority's rationale for setting aside the penalty was that the duty amounts were paid before the notice. The Department's appeal sought to reinstate the penalty equal to the duty amount.

Analysis:
Regarding the shortage detected, which was only 0.04% of the total quantity manufactured during the relevant period, the tribunal considered the argument presented by the respondents' advocate. The advocate contended that the shortage was accumulated over time without verification and was negligible compared to the substantial amount paid by the respondents. It was emphasized that there was no intention to evade duty or misstate facts. The tribunal found the respondents' submissions reasonable, lacking evidence to support penalty imposition under Section 11AC for the minor shortage, especially since duty and interest were promptly paid.

Analysis:
In contrast, concerning the removal of inputs without reversing credit, the respondents' advocate acknowledged the omission and expressed willingness to pay an equal amount of penalty. Based on this concession, the tribunal directed the respondents to pay a penalty of Rs. 41,715/-. Consequently, the Department's appeal was partly allowed, with the penalty reinstated for the specific issue of input removal without credit reversal.