2018 (2) TMI 457 - AT - Central Excise

Clandestine removal - penalty - scope of SCN - Held that - there are no allegations that goods were cleared clandestinely or there has been a case of evasion of duty. The shortage was noticed by the Officers of Central Excise Department on 18/12/2006 as compared to the stock recorded in RG-1 register and the appellant has explained that the entries in RG-1 register were on the basis of formula and it was not on the basis of actual weight. There are no allegations in the said SCN dated 19/06/2007 to establish that there was any clandestine clearance of the finished goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Central Excise duty recovery on shortage of finished goods.
2. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.
3. Appeal against Order-in-Appeal No. 172-CE/GZB/2009.

Central Excise Duty Recovery:
The case involved a shortage of 44.471 MT of M.S. Pipes valued at ?12,42,698, with Central Excise duty amounting to ?2,02,807. The Officers of the Central Excise Department discovered the shortage during a visit to the manufacturing unit. The appellant explained that the production was accounted for on a formula basis, leading to differences in stock recorded in the RG-1 register. The appellant argued that the shortage was not due to clandestine removal of goods, as there was no evidence of such activity. The Original Authority confirmed the demand for duty and imposed a penalty under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld this decision, prompting the appellant to appeal before the Tribunal.

Imposition of Penalty:
The appellant contended that the method of entering data into the RG-1 register was formula-based, making the calculated shortage presumptive in nature. The appellant argued that without evidence of clandestine removal of goods, the penalty was unjustified. The appellant cited a ruling by the Hon'ble High Court of Allahabad to support their argument. The Revenue, represented by the ld. A. R., supported the Order-in-Appeal dated 15/07/2009.

Appeal Against Order-in-Appeal:
After hearing arguments from both sides, the Tribunal, through Member (Technical) Anil G. Shakkarwar, analyzed the case. The Tribunal noted that there were no allegations of clandestine clearance or evasion of duty. The shortage was based on the RG-1 register entries, which were formula-based and not on actual weights. The Tribunal referenced the ruling by the Hon'ble High Court of Allahabad in a similar case, emphasizing that a shortage alone does not imply duty evasion unless linked to clandestine removal, which lacked material evidence in this scenario. Consequently, the Tribunal found the penalty imposition of ?2,02,807 unsustainable and allowed the appeal, entitling the appellant to consequential relief as per law.

This detailed analysis of the judgment highlights the issues of Central Excise duty recovery, penalty imposition, and the subsequent appeal, providing a comprehensive overview of the case and the Tribunal's decision.