2007 (11) TMI 209 - AT - Central Excise

Failure to return back the inputs cleared for job work within 180 days under Rule 4(5) (a) of CCR - appellant is required to debit the duty if they fail to return back the job work material within the stipulated period - demand of duty on the inputs cleared for job work is upheld - shortage of inputs was detected during the stock verification - debited the duty immediately upon detection & before SCN so penalty is set aside - manager not aware about shortages so penalty on him is set aside

Summary

Issues involved:
1. Shortage of inputs involving Central Excise duty
2. Failure to return inputs cleared for job work within 180 days
3. Imposition of penalties under various rules

Analysis:
1. The appellant, engaged in manufacturing footwear, faced a shortage of inputs involving Central Excise duty, which was voluntarily debited after detection during a visit by Central Excise officers. The adjudicating authority confirmed the duty demand and imposed penalties under Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) upheld the penalty imposition, leading to appeals by both the appellant and the Revenue. The appellant argued that the shortage was due to evaporation for storage loss, citing case laws to support their case. However, the authorized representative reiterated the Commissioner's findings, stating that the appellant failed to explain the shortage adequately, leading to suspicions of clandestine removal.

2. The appellant also faced a demand for duty due to failure to return inputs cleared for job work within 180 days as per the Cenvat Credit Rules, 2002. The appellant did not contest this demand seriously, leading to the upheld demand of duty on the inputs cleared for job work.

3. In terms of penalties, the Tribunal found merit in the appellant's arguments. The appellant promptly debited the duty upon detecting the input shortage during stock verification, and the duty was paid before the show cause notice. Citing precedents, the Tribunal set aside the penalty imposed under Section 11AC. Additionally, regarding penalties under Rule 13 of the Cenvat Credit Rules, the Tribunal found no intention of duty evasion due to the duty paid inputs being cleared under Rule 4. Thus, the penalty under Rule 13 was also set aside. The penalty imposed on the appellant No. 2 under Rule 26 of the Central Excise Rules, 2002 was deemed unwarranted as the appellant No. 2, the Manager (Finance), was unaware of the reasons for the shortage. Consequently, the appeal of the appellant No. 1 was disposed of with the appeal of appellant No. 2 being allowed.

This judgment highlights the importance of timely duty payment, adequate explanations for shortages, and adherence to regulatory requirements to avoid penalties in excise duty matters.