2016 (9) TMI 978 - AT - Central Excise

Demand alongwith interest - Shortage of TMT bars - such shortages were accepted by the Appellant in physical stock-taking, but never admitted that the shortages were clandestinely removed from the factory - no evidence of clandestine removal from Appellant s factory - only statement of Shri Dipak Choudhary, Manager of the Appellant was available - Held that - appellant never reverted back to the investigation before the issue of show cause notice that shortages found were reconciliable and that in fact there was no shortages in the stock of finished goods. A different stand taken after the issue of show cause notice, without any retraction, will have to be considered as an after-thought under proper legal advice. By admitting the shortages and not coming forward to explain the same, blocks the investigation. In the case of Majestic Auto Ltd. v. CCE 2004 (7) TMI 136 - CESTAT, NEW DELHI CESTAT held that demand with respect to shortages can be confirmed when no tangible evidence and explanation was offered by the noticee. It is also made clear in this case law that there is no need for the department to produce any tangible and positive evidence to prove clandestine removal when Appellant has admitted the shortages and does not come forward to explain the shortages. No contrary judgement has been brought on record by the Appellant. Therefore, duty has been correctly confirmed against the Appellant along with interest. Non-extension of option of 25% reduced penalty - Section 11AC of the Central Excise Act, 1944 - Held that - in the interest of justice, Appellant is given the option to pay 25% reduced penalty if the same is paid along with duty and interest demanded within 1(one) month from the date of receipt of this order. - Decided in favour of appellant

Summary

Issues:
1. Appeal against Order-in-Appeal upholding Order-in-Original.
2. Shortage of TMT bars during stock verification.
3. Argument for no evidence of clandestine removal.
4. Appeal for 25% reduced penalty option under Section 11AC.

Analysis:
1. The Appellant filed an Appeal against Order-in-Appeal upholding the Order-in-Original regarding a shortage of TMT bars during a stock verification. The Advocate argued that the shortages were confirmed, but there was no evidence of clandestine removal. The Appellant cleared a significant amount of finished goods with a minimal percentage difference. The Advocate requested the Appeal to be allowed, or alternatively, the option of a reduced penalty under Section 11AC to be extended.

2. During the physical stock verification, a shortage of TMT bars was found, and the Manager of the Appellant accepted the shortages but did not provide reasons for them. The Appellant did not respond to the investigation before the show cause notice was issued. The Tribunal referred to a previous case law where it was held that demand for shortages can be confirmed when no tangible evidence or explanation is provided by the noticee. As the Appellant admitted the shortages but did not explain them, duty was correctly confirmed along with interest.

3. The Revenue argued that the Appellant's Manager accepted the shortages during the investigation, and no retraction of the statement was made. The Revenue defended the Order-in-Appeal passed by the first appellate authority, emphasizing the Manager's statement regarding the duty liability on shortages.

4. The Adjudicating authority did not extend the option of a 25% reduced penalty under Section 11AC to the Appellant in the Order-in-Original. The Tribunal, in the interest of justice, granted the Appellant the option to pay the reduced penalty if done so along with the duty and interest demanded within one month from the receipt of the order.

In conclusion, the Appeal was allowed only to the extent of granting the Appellant the option of a reduced penalty, as per the Tribunal's decision.