2008 (10) TMI 234 - AT - Central Excise

Clandestine removal penalty shortage of material held that assessee were required to explain the shortage if any. In the absence of satisfactory explanation duty requires to be paid. However admission of shortage cannot be straightway taken as admission of clandestine removal. The charge of clandestine removal is a serious charge which is required to be proved by reliable evidence - finding of the Commissioner (Appeals) that stock found short could not be considered as a case of clandestine removal unless supported by any other corroborative evidence looks reasonable

Summary

Issues:
- Duty demand and penalty imposition based on shortage of steel ingots during stock verification
- Admissibility of shortage as evidence of clandestine removal
- Applicability of case law in determining clandestine removal

Analysis:
1. Duty demand and penalty imposition based on shortage of steel ingots during stock verification:
The case involved two appeals by the Department against the order of the Commissioner (Appeals) regarding the shortage of 48.957 MTs of steel ingots found during stock verification. The firm admitted the shortage and paid the duty of Rs. 1,19,858/- along with a penalty of Rs. 29,965/-. The original authority demanded duty and imposed penalties on both the firm and a partner. However, the Commissioner (Appeals) set aside the penalties imposed.

2. Admissibility of shortage as evidence of clandestine removal:
The learned DR for the Revenue argued that the shortage, coupled with the absence of a satisfactory explanation, could indicate clandestine removal of goods. Citing a decision of the Hon'ble High Court of Delhi, the DR contended that the shortage could be considered evidence of clandestine removal. However, the Tribunal noted that while duty needed to be paid in the absence of a satisfactory explanation, the mere admission of shortage did not automatically imply clandestine removal. The Tribunal emphasized that the charge of clandestine removal required reliable evidence for proof.

3. Applicability of case law in determining clandestine removal:
The Tribunal carefully considered the submissions and reviewed the records. It noted that the case law cited by the DR involved a scenario where goods were cleared upon payment of duty, which differed from the current case where the shortage was admitted but not necessarily indicative of clandestine removal. The Tribunal upheld the Commissioner (Appeals)'s finding that the stock shortage could not be deemed as clandestine removal without additional corroborative evidence. Consequently, the appeals by the Department were rejected.

In conclusion, the Tribunal emphasized the need for reliable evidence to establish the serious charge of clandestine removal, highlighting that the mere admission of shortage did not automatically imply such misconduct. The decision underscored the importance of thorough examination and corroborative evidence in cases involving duty demand and penalties based on stock discrepancies.