2017 (3) TMI 513 - AT - Central Excise

Shortage of inputs - demand - Held that - The adjudicating authority as well as the Commissioner (Appeals) decided the matter only on the observations of the Settlement Commission. Wherein the Settlement Commission has relied upon the report of the Commissioner (Investigation). However, the adjudicating authority has not taken pain to examine the reconciliation statement and gave independent findings, by not doing so he has not discharged the duty as adjudicating authority - the matter needs to be considered by the adjudicating authority in respect of reconciliation statement submitted by the appellant. Imposition of penalty u/s 11AC - rejected inputs - Held that - on the issue of admissibility of credit on the rejected inputs the issue is debatable - penalty u/s 11AC is not imposable. Returned goods - Rule 16 - demand on the ground that returned duty paid goods were not re-issued within six months - Held that - the period of six months was not provided under Rule whereas it is provided by way of trade notice which is procedural one. Under any circumstances duty paid goods cannot be levied duty twice only because it is not cleared within six months from the factory of the appellant - demand set aside. Personal penalty imposed on the employees of the appellant - Held that - all the issues involved are debatable - it is not a fit case for imposing penalty on the employee of the appellant company - penalty set aside. Appeal disposed off - decided partly in favor of assessee.

Issues involved:
1. Duty demand on shortages of inputs during stock taking.
2. Denial of Cenvat Credit on rejected inputs and imposition of penalty under Section 11AC.
3. Duty demand on returned goods not cleared within six months.
4. Imposition of penalty on employees under Rule 26 of the Central Excise Rules, 2002.

Analysis:

1. Duty demand on shortages of inputs during stock taking:
The appellant submitted a reconciliation statement to the adjudicating authority, disputing the shortages found by departmental officers. However, the authority relied solely on the observations of the Settlement Commission without independently examining the reconciliation statement. The Tribunal held that the duty demand issue needs to be reconsidered by the adjudicating authority, directing a careful verification of the reconciliation statement and independent findings.

2. Denial of Cenvat Credit on rejected inputs and penalty under Section 11AC:
The Tribunal found the issue of admissibility of credit on rejected inputs to be debatable. Since the demand was for the normal period and not under an extended period, the penalty under Section 11AC was deemed not imposable. The Tribunal set aside the penalty imposed under Section 11AC.

3. Duty demand on returned goods not cleared within six months:
The duty demand of &8377; 2,36,608/- on returned goods was based on the goods not being re-issued within six months. The Tribunal noted that the six-month period was procedural and not provided under the relevant rule. Relying on legal precedents cited by the appellant, the Tribunal concluded that duty on returned goods was wrongly demanded and set aside the demand and corresponding penalty.

4. Imposition of penalty on employees under Rule 26:
Considering the debatable nature of all issues involved, the Tribunal found it inappropriate to impose penalties on the employees of the appellant company. Therefore, the penalties imposed on the employees were set aside.

In conclusion, the Tribunal remanded one appeal to the adjudicating authority for reconsideration, maintained the Cenvat credit demand, dropped remaining duty demands and penalties, allowed the appeals filed by the employees, and set aside the penalties imposed on them. The judgment was pronounced on 27/02/2017.

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