2017 (5) TMI 138 - AT - Central Excise

Shortage of finished product - Non Alloy Ingot - the case of appellant is that the joint Verification Report, by which shortage was discovered, was prepared without any weighment and it was only eye estimation - Held that - joint verification report of the physical stock was prepared in presence of the representatives of the appellant. No dispute was raised - the demand of duty alongwith interest is justified. Mere shortage of the goods ascertained during stock verification, would not be treated as clandestine removal of the goods. There is required positive act to establish clandestine removal of the goods. In the present case, there is no material on record of the clandestine removal of the goods. So, the imposition of penalty u/s 11AC of the CEA, 1944 is not warranted. Demand of duty with interest upheld - penalty set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
- Shortage of Non Alloy Steel Ingot during Physical Joint Verification
- Confirmation of Central Excise Duty demand, Education Cess, interest, and penalty
- Disallowance of appeal by first appellate authority
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944

Shortage of Non Alloy Steel Ingot during Physical Joint Verification:
The appellant, engaged in manufacturing Non Alloy Steel Ingot, faced a shortage of 264.807 M.T. during a Physical Joint Verification conducted by the Anti Evasion Unit. The Manager of the company could not recall the exact reason for the shortage. A sum of ?5.00 Lakhs was deposited towards the duty liability. The appellant contested the shortage, claiming it was based on eye estimation without actual weighment, and that the officers compelled signatures on the verification report.

Confirmation of Central Excise Duty demand, Education Cess, interest, and penalty:
Following the verification, a Show Cause Notice was issued, resulting in the confirmation of Central Excise Duty amounting to ?5,29,614/-, Education Cess of ?10,592/-, interest, and a penalty of ?5,45,503/- under Section 11AC of the Central Excise Act, 1944. The amount deposited by the appellant was adjusted against the duty. The first appellate authority upheld the Order-in-Original, leading to the present appeal.

Disallowance of appeal by first appellate authority:
The first appellate authority rejected the appellant's appeal, prompting the appeal to the Appellate Tribunal CESTAT KOLKATA for reconsideration. The appellant argued that the shortage was not based on actual weighment and that the officers coerced the payment without proper verification.

Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The Tribunal found that while the demand of duty was justified due to lack of evidence supporting the appellant's claims, the imposition of penalty under Section 11AC was unwarranted. The Tribunal emphasized the need for a positive act to establish clandestine removal of goods, which was not evident in this case. Relying on precedents, the Tribunal set aside the penalty, partially allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Section 11AC of the Central Excise Act, 1944, due to lack of evidence supporting clandestine removal of goods.