2017 (2) TMI 570 - AT - Central Excise

Clandestine removal - Shortage of stock - Penalty - Rule 25 of CER, 2002 - stock valuation was by way of estimation basis - Held that - I find that save and except the presumption of clandestine removal no corroborative evidence have been brought on record by the Revenue either in the Show Cause Notice or in the Order-in Original. The only case of the Revenue is that it is not disputed by the respondent-assessee regarding valuation of stock verification made by the Revenue. Accordingly, I hold that no case of clandestine removal and clandestine production have been made out against the respondent-assessee in the facts and circumstances of this case - Decided in favor of the assessee.

Summary

Issues:
Whether the Show Cause Notice justifies the penalty under Rule 25 of Central Excise Rules, 2002 read with Section 11 AC of Central Excise Act, 1944.

Analysis:
The Revenue filed an appeal against the Order-in-Appeal passed by the Commissioner of Customs & Central Excise (Appeals), Meerut, regarding a shortage found in the stock of finished goods and raw materials during an inspection. The Show Cause Notice was issued based on this shortage, alleging failure to maintain proper accounts. The respondent-assessee offered to deposit the duty towards the alleged shortage voluntarily. The Show Cause Notice proposed demanding duty and imposing a penalty under Rule 25(1)(a) & (b) of Central Excise Rules, 2002. The Adjudicating Authority confirmed duty on the shortage of finished goods, dropped the proposed demand on raw material, and imposed a penalty on the respondent-assessee.

The respondent-assessee challenged the Order-in-Original, raising various grounds, including lack of evidence supporting clandestine production or removal of goods. They argued that no penalty should be imposed without evidence of clandestine activity. The Adjudicating Authority relied on the statement of the authorized person and imposed a penalty based on the presumption of clandestine removal. Cross Appeals were filed, with the demand of duty and penalty being upheld. The Revenue also appealed, seeking an enhanced penalty based on the violation of the Act and Rules due to alleged clandestine removal.

After considering the contentions, the Tribunal found that no corroborative evidence of clandestine removal was presented by the Revenue. The Revenue's case relied on the respondent-assessee not disputing the stock valuation made by the Revenue. As no case of clandestine removal or production was established, the Tribunal held that no penalty under Rule 25(1) of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944 should be imposed. The Tribunal set aside the penalty imposed by the Commissioner (Appeals) and dismissed the Revenue's appeal, entitling the respondent-assessee to a refund of excess tax and penalty deposited.

In conclusion, the Tribunal's decision focused on the lack of concrete evidence supporting the allegation of clandestine removal, leading to the dismissal of the Revenue's appeal and the refund of excess amounts to the respondent-assessee.