2018 (10) TMI 318 - HC - Central Excise

Clandestine removal - shortage found in stock taking - Appellant s contention is that the demand is unsustainable as no physical stocktaking was done - proviso to Section 11A of the Act, 1944 - penalty - Held that - The above defence was taken by the Appellant long after the date of the stocktaking i.e. only in response to the show cause notice. Moreover, it is to be noted that at the time when the objection was taken, it would not be possible to reverse the clock and direct physical stocktaking to determine the shortage on the date when the 200.278 MT of raw material, was found short - The view taken by the Tribunal on facts, is a possible view and no interference would be warranted. CENVAT Credit - Held that - The question of law as proposed completely ignores the fact that proceedings for recovery of Cenvat Credit and imposition of penalty have been taken in terms of Rule 14 and 15 of Cenvat Credit Rules 2004 read with Sections 11A and 11AC of the Act. Thus, taking of Cenvat Credit on inputs which was found to have not been received would justify the present proceedings. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of proviso to Section 11A of the Central Excise Act, 1944 regarding duty evasion due to fraud, collusion, or willful misstatement.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 in cases of non-levy or payment of duty due to fraud or suppression of fact.

Analysis:
1. The appeal challenged an order by the Tribunal under Section 35G of the Central Excise Act, 1944, focusing on the interpretation of the proviso to Section 11A. The Revenue contended that the Tribunal erred in not considering the proviso, which allows the Central Excise officer to serve a notice within five years for duty evasion due to fraud, collusion, or willful misstatement. The Tribunal found a shortage of raw materials during stocktaking at the Appellant's factory, leading to a show cause notice for demand of Cenvat Credit and penalty under Rules 14 and 15 of the Cenvat Credit Rules 2004. The Appellant disputed the notice, but subsequent authorities confirmed the shortage, leading to the conclusion that the defence raised later was an afterthought. The Tribunal's decision was upheld as a possible view, and the proceedings were justified under Sections 11A and 11AC.

2. The second issue involved the imposition of penalty under Section 11AC for non-levy or payment of duty due to fraud or suppression of fact. The Appellant relied on a precedent where nonpayment of duty did not lead to mandatory penalty under Section 11AC. However, the Court distinguished the present case as involving Cenvat Credit taken on inputs not received, contrary to the precedent's facts. The Court held that the questions raised did not present substantial legal issues and dismissed the appeal without costs. The decision emphasized the factual findings regarding the shortage of raw materials and the subsequent payment of duties, justifying the imposition of penalties under the Act.

This comprehensive analysis of the judgment highlights the key legal issues, interpretations of relevant provisions, factual background, and the Court's reasoning leading to the dismissal of the appeal.