2018 (7) TMI 252 - AT - Central Excise

Validity of SCN - Section 11A (2B) of the Central Excise Act, 1944 - shortage of stock as reflected in the statutory records i.e. Daily Stock Register - case of appellant is that the Central Excise Officers ascertained the duty liability during the stock verification conducted on 20.09.2006 of ₹ 11 lakhs and which was paid by them vide post dated cheques. Therefore, in terms of the provisions of Section 11A (2B) of the Central Excise Act, 1944, there is no requirement to issue the SCN - time limitation. Held that - On close reading of Section 11A (1), it is seen that the Central Excise Officers are required to issue notice within one year from the relevant date on the person chargeable with duty which has not been paid. In case, there is fraud, collusion or willful misstatement, etc., the notice should be issued within five years - Sub-section (2B) of Section 11A of the Act had given an option to the assessee to pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice, and to inform the Central Excise Officer in writing, who, shall not serve any notice in respect of the duty so paid. In the present case, the duty is to be paid on 20.09.2006 i.e. the date on which the shortage has been detected by the Central Excise Officers. Therefore, the findings of the adjudicating authority that the information of payment of duty was given to the department on 09.02.2007 are contrary to the evidence on record. It is on record that the Central Excise officers deposited the post dated cheques from 26.10.2006 onwards in the bank for encashment vide TR-6 challans. Hence, the finding of the adjudicating authority is not sustainable. There was no requirement to issue SCN as per provisions of Section 11A (2B) as the appellant had already paid the duty as ascertained by the officers before issuance of SCN - the impugned order is modified to the extent that the demand of ₹ 11 lakhs as deposited by the appellant before issuance of Show Cause Notice is upheld and the balance amount of demand of duty alongwith interest and penalty are set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Shortage of stock and duty liability.
2. Issuance of Show Cause Notice under Section 11A (2B) of the Central Excise Act, 1944.
3. Bar of limitation for demand of duty.
4. Payment of duty and penalties imposed.

Issue-wise Detailed Analysis:

1. Shortage of Stock and Duty Liability:
The appellant, engaged in the manufacture of aluminium products, was found to have a shortage of stock during a verification conducted by Central Excise Officers on 20.09.2006. The Director admitted a duty liability of ?11 lakhs for the shortage and paid it via post-dated cheques. A further statement was recorded on 05.10.2007, and a Show Cause Notice was issued on 05.11.2007. The adjudicating authority confirmed a demand of ?21,31,530/- along with interest and an equal penalty, appropriating the ?11 lakhs already deposited. The penalty on the Director was reduced to ?12,500/- by the Commissioner (Appeals).

2. Issuance of Show Cause Notice under Section 11A (2B):
The appellant contended that since the duty liability was ascertained and paid during the stock verification on 20.09.2006, there was no requirement to issue a Show Cause Notice under Section 11A (2B) of the Central Excise Act, 1944. The Central Excise Officers, however, argued that the quantification of the duty liability was not completed at the time of stock verification and was confirmed only after the statement on 05.10.2007.

3. Bar of Limitation for Demand of Duty:
The appellant argued that the Show Cause Notice issued on 05.11.2007 was beyond the normal period of limitation and thus barred. The Revenue contended that the notice was within the stipulated period as the duty was not fully paid in terms of Section 11A (2B). The adjudicating authority held that the notice was issued within one year from the date of payment of duty, which was 05.02.2007, not from the date of stock verification.

4. Payment of Duty and Penalties Imposed:
The Tribunal found that the duty liability of ?11 lakhs was ascertained and paid on 20.09.2006, and thus, no Show Cause Notice was required under Section 11A (2B). The Tribunal noted that the Central Excise Officers deposited the post-dated cheques from 26.10.2006 onwards. The Tribunal agreed with the appellant that the demand was barred by limitation and the extended period could not be invoked. However, since the appellant accepted the duty liability of ?11 lakhs, the Tribunal upheld this amount and set aside the balance demand, interest, and penalties.

Conclusion:
The Tribunal modified the impugned order, upholding the demand of ?11 lakhs deposited by the appellant before the issuance of the Show Cause Notice and setting aside the balance amount of demand, interest, and penalties. The appeals were disposed of accordingly.