2004 (7) TMI 267 - AT - Central Excise

Summary

Issues:
1. Confirmation of excise duty demand for shortage in raw material stock.
2. Confirmation of excise duty demand for clearances of samples.
3. Imposition of penalties under Section 11AC and Rule 209A of the Central Excise Rules, 1944.

Analysis:

Issue 1: Confirmation of excise duty demand for shortage in raw material stock
The appellants contended that the duty on the alleged shortage was paid promptly on the day of the central excise officers' visit. While the duty payment was not disputed, the penalty imposed was challenged as a composite amount for both input shortage and samples. The appellants acknowledged the duty payment for the input shortage but argued that the prompt payment before the show cause notice did not negate the fact of input removal without duty payment. The Tribunal upheld the duty payment for the input shortage but reduced the penalty from Rs. 36,000 to Rs. 5,000, considering the circumstances.

Issue 2: Confirmation of excise duty demand for clearances of samples
The appellants contested the duty demand on samples taken from each batch of medicine to determine marketability. Citing various Tribunal and Supreme Court decisions, the appellants argued that samples for quality control tests are not liable for excise duty. They maintained that the samples were tested for quality control before product clearance for marketing. The Tribunal agreed with this argument, ruling that samples cleared for quality control tests are not subject to excise duty. Consequently, the duty demand of Rs. 78,754 on sample clearances was set aside.

Issue 3: Imposition of penalties
The penalties imposed under Section 11AC and Rule 209A of the Central Excise Rules, 1944 were challenged by the appellants. The Tribunal reduced the penalty from Rs. 36,000 to Rs. 5,000 due to the circumstances surrounding the case and the prompt duty payment for the input shortage. Additionally, since the duty demand on sample clearances was set aside, the penalty imposed on Mr. Nitin Bund was also revoked. The Tribunal partially allowed the appeal by modifying the impugned order, reducing the penalty and setting aside the duty demand on sample clearances.

This detailed analysis of the judgment highlights the key issues of excise duty demands, penalties, and the Tribunal's decisions on each aspect of the case.