2018 (12) TMI 772 - AT - Central Excise

Clandestine removal - shortage of stock - MS Flat - invocation of provision of Section 11AC - Held that - There is no evidence brought on record by the Department to substantiate that the goods found short were clandestinely removed. The manufacturer s obligation to account for the goods received as inputs and the finished good in stock Register is a statutory obligation, failure to do so clearly attracts the penalty provisions. However, no evidence has been relied upon by the Department justifying invocation of provision of Section 11 AC. The challenge of the appellant seeking setting aside of demand of Duty, does not deserve to be accepted. Having held that it is not a case for invoking the provisions of Section 11AC, the penalty imposed is set aside - a general penalty of ₹ 5,000/- under Rule 27 of the Central Excise Rules, 2002 is imposed for breach of Rules. Appeal disposed off.

Summary

Issues:
- Shortage of inputs noticed during physical verification
- Show Cause Notice issued for central excise duty, interest, and penalty
- Appeal filed against Adjudication Order
- Allegation of violation of principles of natural justice
- Dispute regarding shortage of MS Flat and payment made by appellant
- Imposition of penalty under Section 11AC challenged
- Lack of evidence for clandestine removal of goods
- Upholding of demand for duty
- Setting aside of penalty under Section 11AC
- Imposition of general penalty under Rule 27 of Central Excise Rules, 2002

Analysis:
The appellant, engaged in manufacturing various structures, faced a shortage of MS Flat during a physical verification by Central Excise Officers. A Show Cause Notice was issued, leading to the confirmation of central excise duty demand, interest, and penalty by the Adjudicating Authority. The appeal against this order was rejected by the Ld. Counsel (Appeals), prompting the appellant to approach the Tribunal. The appellant raised concerns about the violation of natural justice, particularly regarding the rejection of adjournment leading to an ex-parte order. The appellant argued that the shortage of MS Flat was due to processing at a job worker's place, supported by entries in statutory registers. Despite paying the alleged shortage amount on the spot, the appellant contested the imposition of penalty under Section 11AC and the need for interest payment.

During the hearing, the Ld. Consultant emphasized the deposition of the duty amount and challenged the imposition of penalty under Section 11AC, asserting that no evidence supported clandestine removal. The Tribunal observed the lack of evidence justifying the invocation of Section 11AC and upheld the demand for duty. However, the penalty under Section 11AC was set aside, considering the absence of proof for clandestine removal. A general penalty under Rule 27 of the Central Excise Rules, 2002, amounting to &8377; 5,000, was imposed for rule breach. The Tribunal concluded that while the manufacturer's obligation to account for goods is crucial, the penalty under Section 11AC was not warranted in this case, ultimately disposing of the appeal in the mentioned terms.