2017 (2) TMI 568 - AT - Central Excise

Cenvat credit - Shortage of stock - Penalty - Held that - While calculating the demand on shortages, it is noticed that officers had considered the average weight of a barrel as 25 Kgs., while factually weight ranged between 20.5 to 23 kgs. If the factual weight is taken for calculation there is marginal shortage, which is included in the amount already reversed by the main appellant. As regards the penalties imposed on the director of the company, I find that they have accepted that there were errors in the records hence I find that adjudicating authority was correct in imposing penalties on them - Decided against the assessee

Summary

Issues:
1. Demand of duty for shortages and irregularities in availing CENVAT credit.
2. Imposition of penalties on the main appellant and directors.
3. Appeal by Revenue against dropping of demand.
4. Correctness of penalties imposed under Rule 173Q of Central Excise Rules, 1944.

Analysis:
1. The appeals were against an Order-in-Original regarding duty demand and irregularities in CENVAT credit availed. The main appellant had availed credit twice on the same invoice, leading to shortages and excess credit. The adjudicating authority set aside some demands but confirmed others related to shortages and excess credit availed. The appellant had reversed the CENVAT credit before the show-cause notice was issued. The penalties and confiscations were imposed based on the irregularities found.

2. The main appellant sought to set aside the penalties imposed, arguing that the disputed amount was repaid with interest. The counsel contended that penalties were incorrectly imposed under Rule 173Q without specifying the clause, citing a Supreme Court decision. The penalties on the directors were also challenged. The Departmental Representative argued that penalties were justified as duty-paid inputs were found short, supported by the Excise incharge's admission.

3. The Revenue appealed against dropping the demand for shortages, contending that the admission during panchanama invalidated dropping the demand. The Tribunal noted discrepancies in calculating shortages and upheld the adjudicating authority's decision. Penalties imposed on the directors were upheld due to errors in records admitted by them.

4. Regarding the penalties imposed under Rule 173Q, the Tribunal referred to a Supreme Court decision emphasizing the necessity of specifying the exact nature of contravention. Following the precedent, the penalty on the main appellant was set aside. The appeals were disposed of accordingly, with the judgment pronounced on 24.01.2017.